What is a Property Settlement?

Following the breakdown of a marriage or de facto relationship you and your partner will need to divide your assets, liabilities and financial resources, this process this known as a Property Settlement.

So, who gets what in a Property Settlement? The division of property should be fair in the circumstances. The law does not require a 50/50 division nor will the fault of either party in the breakdown be a relevant factor. Note that whether the parties were married or in a de facto relationship makes no difference to the outcome.

A property settlement can occur with or without the court’s involvement. Parties may reach a formal or informal agreement between themselves, or they may apply to the court to divide their property. Either way it is advisable that you receive legal advice on your property rights.

How to Apply for a Property Settlement

If you and your partner are unable to agree on the division of your assets you can apply to the Court for orders, provided that you have complied with the Compulsory Pre-Action Procedures. If you are thinking of commencing court proceedings, it is important to take note of the following.

Time Limit

An application must be filed within 2 years from the date of separation, in the case of a de facto relationship, or withing 12 months from the date of divorce, in case of a married couple. However, the court may allow an application to be filed later if it is satisfied that that the party seeking property orders would suffer hardship otherwise.

Parties are not required to seek legal advice before commencing court proceedings, nor must parties be legally represented during the proceedings. However, given the complex nature of family law, it is advisable that you seek legal advice about your rights and responsibilities prior to commencing proceedings.

Alternative Dispute Resolution (ADR)

The Family Law Rules requires all parties in any family law matter to make a genuine effort to resolve their dispute before starting a case. In practice, this means that all parties to property disputes must participate in ADR processes, such as negotiation, mediation, or conciliation, prior to going to court unless:

  • The matter is urgent.
  • The case involves family violence.
  • There is a genuinely intractable dispute.
  • The case involves fraud; or
  • The time limit is about to expire.

How Does the Court Determine a Property Settlement?

In determining the appropriate division of assets the Court will take the five-step approach which was laid down in the seminal case of Stanford & Stanford.

1. Just & Equitable

First, the court must consider whether it is Just & Equitable to make orders for a property settlement. In practice this requirement is almost always satisfied, although the court may determine that it is not just and equitable where, for example:

  • The parties have kept their finances and assets separate throughout their relationship; or
  • Making orders may result in the financial ruin of one or both parties.

2. The Property Pool

Second, the court will identify and value all the parties’ assets, financial resources and liabilities. Generally, the property pool will include the following:

  • Real Estate.
  • Bank Accounts & Money held in Cash.
  • Superannuation.
  • Inheritances.
  • Investments or Shares,
  • Personal Property e.g., Cars, Furniture or Jewellery.
  • Any Debts.

3. Contributions

Third, the court will consider each party’s contributions to the property pool. Each parties’ contributions will be awarded a percentage value which will reflect the division of the property pool.

Contributions can include:

  • Direct and indirect financial contributions e.g., initial property contributions, salary or an inheritance.
  • Non-financial contributions e.g., contributions to the conservation of property or homemaking or parenting contributions.

4. Future Needs

Fourth, the court will consider each party’s future needs. That is, the court will consider the ability of each party to financially support themselves post-separation and then adjust the division of the property pool appropriating. The relevant factors at this stage are set out in s 75(2) Family Law Act, these include:

  • age and health of the parties;
  • whether any party is responsible for the primary care of children;
  • each parties financial resources and earning capacity; and
  • a party’s eligibility for social security or superannuation.

5. Property Orders

Finally, the court will determine what property orders will be just and equitable to make in the circumstances. At this stage the court will consider the practical effect of dividing the property according to their findings at the other stages and adjust their final orders if necessary.

What Happens If My Partner & I Reach an Agreement Ourselves?

Parties are free to make their own agreements regarding the division of their property. In fact, it is more efficient and cost effective if you do so. However, any such agreement will not be legally enforceable unless the parties obtain consent orders or enter into a binding financial agreement.

What Happens if I have a Prenup?

A prenup, or a binding financial agreement as they are known in Australia, sets out how your property and financial resources are to be divided following separation. If the prenup is valid you will not need do enter into a property settlement; however, note that a prenup may be set aside in particular circumstances.

Am I Entitled to Spousal Maintenance?

You may be entitled to financial support from your former partner if you are unable to adequately support yourself and your former partner has the capacity to pay the necessary maintenance.