In Australia, the division of assets after separation or divorce is governed by the principle of what is “just and equitable,” as outlined in the Family Law Act 1975. The process involves assessing the financial and non-financial contributions of each party, as well as their future needs, to reach a fair outcome.
Here’s how it works:
1. Identify and value the assets and liabilities
- Create a list: All assets, liabilities, and superannuation owned by both parties (jointly or individually) are considered. This includes:
- Real estate (family home, investment properties).
- Bank accounts, shares, and investments.
- Superannuation accounts.
- Vehicles, furniture, and personal items.
- Businesses, trusts, and partnerships.
- Debts, such as mortgages, loans, and credit cards.
- Valuation: Assets and liabilities are valued based on their current market value at the time of settlement, not when the relationship ended.
2. Assess contributions
The court evaluates the contributions of each party, which include:
- Financial contributions:
- Income earned during the relationship.
- Savings, inheritances, or gifts.
- Contributions to property purchases or mortgage payments.
- Non-financial contributions:
- Contributions as a homemaker or primary carer of children.
- Renovations or maintenance of the family home.
- Both financial and non-financial contributions are weighed equally, recognising the importance of both roles in the relationship.
3. Consider future needs
The court then examines the future needs of each party, including:
- Income and earning capacity: Differences in income, age, and ability to earn in the future.
- Health: Any health issues that may affect earning potential or require ongoing care.
- Care for children: The party responsible for the primary care of children may receive additional consideration.
- Financial resources: Access to resources such as family support or trusts.
4. Determine what is “just and equitable”
Finally, the court ensures the division is fair, considering:
- Each party’s ability to support themselves after separation.
- The standard of living established during the relationship.
- The length of the relationship and any significant sacrifices made by one party (e.g., leaving a career to raise children).
5. Methods of reaching an agreement
- Negotiation: Many couples settle asset division through direct negotiation, often with the help of solicitors.
- Mediation: If negotiation fails, mediation can help parties reach a mutually acceptable agreement without going to court.
- Consent orders: Once an agreement is reached, it can be formalised through Consent Orders approved by the Family Court.
- Court proceedings: If parties cannot agree, the court will make a legally binding decision. Litigation should be a last resort, as it can be costly and time-consuming.
Key considerations
- Superannuation: Superannuation is treated as property and can be split between parties but remains in the superannuation system until retirement age.
- Pre-relationship assets: Assets owned before the relationship may be considered but can be offset by contributions made during the relationship.
- Debts: Both parties are generally responsible for shared debts, regardless of whose name they are in.
- Time limits: Applications for property settlement must be made within 12 months of a divorce being finalised or within two years of the end of a de facto relationship.
Seek legal advice
Asset division can be complex, especially in cases involving businesses, trusts, or significant disputes. Consulting a family lawyer ensures your rights are protected and helps you achieve a fair outcome tailored to your unique circumstances.
To talk to our family law team, reach out to us on 1300 676 267 for a free initial 15-minute consultation to determine your needs and how we might help you and your dependents.