Australia: The basics of property settlement in family law

The law on determining how the assets and property of a marriage are to be divided is covered under section 79 of the Family Law Act (or section 90SM if a de facto relationship exists). A range of factors that are taken into consideration sit under this section however, the real question is 'what weight ought to be attributed to each of these factors?'.

The five step process

There are five significant steps which Courts will generally follow when determining the division of the matrimonial asset pool:

  1. Whether it is just and equitable to make an order in the first place: The Court must first look at whether it should seek to alter the property interests of the parties to the dispute.
  2. Identify the pool of property that exists: It is necessary to determine the assets, liabilities and financial resources of each the parties, forming the available pool of property to be divided.
  3. Assess the contributions of each of the parties: It is then necessary to conduct an examination of all of the contributions (both financial and non-financial) throughout the marriage; including any initial contributions, contributions made during the marriage and any in the period following separation.
  4. Determine whether there should be any adjustment on account of a party's future needs: Consideration will be given to whether there is any disparity in the future financial needs of the parties and whether one party should receive an adjustment because of such disparity.
  5. What a just and equitable outcome is: Any alteration of the property interests of the parties needs to be undertaken in a just and equitable manner, having regard to all of the relevant circumstances.

The starting point to working out how the property pool should be divided

In most cases, the process for determining how the pool of property should be divided is for the parties to attempt resolve their matter without initiating formal legal proceedings. In most cases, negotiations can carefully occur when the parties engage legal representation and after financial disclosure (see below). It is often possible for discussions to be entered into through communications between the parties' lawyers.

Parties can also be assisted by other dispute resolution avenues such as mediation, which aims to enable parties (along with their lawyers) to have confidential settlement discussions using a trained mediator. The mediator's role is to guide the parties towards a resolution whilst still maintaining neutrality.

Should an agreement be reached, then this can be formalised through the making of formal Consent Orders. There are obvious advantages to parties who are able to resolve their matter without formal legal proceedings being initiated, including:

  1. The parties themselves are able to have input into the final outcome;
  2. The dispute is capable of being resolved much more quickly; and,
  3. There are significant cost savings to each of the parties in settling outside of Court.

Court action

Court action is generally only contemplated after the parties have attempted to settle their matter through the steps referred to above. Matters which require a judicial determination usually involve complex matters or are due to one or both of the parties being inflexible or having unrealistic expectations.

For a matter to proceed to final hearing, it's necessary to ensure that the Court has all the evidence available to be able to make a decision. Where there are disputes about the value of particular assets, for example the former matrimonial home or a business interest, Court appointed experts can be called on to provide an opinion as to value.

The Judge presiding over a matter will determine a matter based on the five step process outlined above, making Orders which become legally binding and enforceable on the parties.

Financial disclosure is a must

Each party has an obligation under the Family Law Rules to provide full and frank disclosure of their current financial circumstances. This ensures that a level playing field exists between the parties and that each party has had the benefit of understanding the true financial position of the other.

Upon disclosure all of the assets, liabilities and financial resources which are clearly identified and valued (if necessary), the parties can work off the same balance sheet as they attempt to resolve their dispute.

A party that attempts to avoid complying with their obligations to disclose is at risk of having adverse findings made against him/her, where that person's credibility comes to bare. It is open to, and indeed commonplace, for Courts to make specific orders for parties to make documents and materials relating to their financial circumstances available. Other avenues that exist for obtaining information about a person's financial situation include subpoenas directed to third parties who hold records and information relevant to a party.

In cases where a party has been less than frank with making their financial position known and this only becomes known after a matter has been finalised, the other party can file a fresh application to the Court to have the earlier agreement or decision set aside and for the matter to be re-determined. This usually involves a significant cost order being made against the offending party.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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