The Five Step Approach to Property Settlement after Separation

Jun 19, 2020 | Property Law

One of the fundamental issues which require addressing during the process of a breakdown of marriage or de-facto relationship is the subject of a ‘property settlement’. A property settlement is an arrangement which is made between the separating parties when dividing assets, liabilities and financial resources (such as a trust, bank deposits or future inheritance). There is no presumption in family law whereby each party receives an equal division of assets in a property settlement.

Each case is unique and varies depending on a set of circumstances which are set out in in the Family Law Act 1975. For this reason, property settlements should be approached in a bespoke manner to ensure a just and equitable result in achieve for the parties. In assessing this criteria, there are five steps that the courts consider when parties are contemplating a property settlement at the end of a marriage or de-facto relationship. This article will explain these 5 important steps.

The Five (5) Step Approach:

Step 1: Identify the assets available for division

The first step is to determine the net asset pool of the relationship. This will involve identifying whether the current assets and liabilities of each party are held jointly with the former partner or separately.

It is prudent that parties provide full and frank disclosure of their personal property, including real estate, vehicles, furniture, shares and bank accounts, as required by the legislative principles. It is also important that parties account for other financial resources such as whether they are beneficiaries under a trust or a Will. Whether a property forms part of the main asset pool to be divided will depend on the degree of control and interest exercised by each party.

Similarly, joint liabilities must also be taken into account, including mortgages, personal loans and credit card balances.

Step 2: Contemplate whether it is ‘just and equitable’ to make an adjustment

The Court must then consider whether it is ‘just and equitable’ to intervene and make any adjustment to the property division before assessing individual contributions by the parties.

Step 3: Consider the contribution of each party to the relationship

Both financial and non-financial contributions made by each party will be assessed by the Court. This includes contributions from the time of commencement of co-habituation through to after separation.  The main categories of contributions are recognised as follows:

1. Financial

Monetary contributions made during the relationship, including:

• Income and wages;
• Property acquired during the relationship;
• Assets owned at the commencement of co-habitation;
• Gifts and prize winnings;
• In some cases, inheritances.

2. Parent/Carer and Homemaker

Contributions to the welfare of the family are significant and can be seen as equal compared to a party working full-time. Some examples include:

• Caring for children;
• Caring for elderly;
• Homemaking;
• Housework;
• Cleaning;
• General parenting responsibilities;
• Grocery shopping and cooking;

3. Non-financial

This category recognises that non-financial value can be contributed to the relationship.

• Renovations or landscaping work done to the family home or an investment property;
• Unpaid work in a family business;
• Contributing to start up a business.

Step 4: Identify the future needs of each party

After assessing the contributions of each party, the Court must have regard to the current and future needs of each party to the relationship. The factors which the Court considers are detailed in Section 75(2) of the Family Law Act which include:

• Age and state of health;
• Income and future earning capacity;
• Property and financial resources;
• Parental responsibility of children;
• Caretaking responsibilities;
• Duration of the relationship or marriage.

Step 5: Review whether the final proposed division is ‘just and equitable’

In the final step, the Court will consider whether the proposed percentage distribution and allocation of assets and liabilities is fair. In this step, the Court may consider making an adjustment under section 75(2) of the Family Law Act which may vary the end result.

Seek Legal Advice

Property settlement and family law proceedings can often be complex. If you would like further information regarding property settlements or if you have any general family law enquiries, please do not hesitate to contact one of our experienced solicitors on 9963 9800 for a confidential discussion or via our contact form.