Following a relationship separation, the Family Law seeks to answer four key questions in order to determine how assets will be divided between the parties who were previously in a marriage or de facto relationship.
1. What is the net asset pool of the parties?
In order to determine the asset pool of the parties for property division, a balance sheet is required, which sets out in detail the assets, liabilities and superannuation of each of the parties. Assets are everything of value, and may include real estate, shares, motor vehicles, furniture etc.
Before commencing property settlement proceedings, both parties are obliged to make full and frank disclosure about their respective financial circumstances. Failure to do so may result in a party being held in contempt of court. This is a serious breach and implications may arise if you do not comply with this duty.
2. What have each of the parties contributed to the net asset pool?
In order to determine what each of the parties contributed to the net asset pool, the law looks to what assets and liabilities each party entered into the relationship with and what each party provided during the relationship, both financial and non-financial.
Contributions may be in the form of income from employment, running a business, money received from a family member in the form of gifts or inheritance, or even compensation payments. Homemaking and parenting contributions are also important to consider.
After assessing both financial and non-financial contributions, if the parties cannot agree, a court will determine each party’s overall level of contribution on a percentage basis.
3. What are the parties’ future needs and how might they need to be adjusted?
When a court has to determine the future needs of each of the parties, this may cause an adjustment to be made to their contribution percentages. The relevant factors in assessing those needs derive from section 75(2) of the Family Law Act 1975 (Cth).
In summary, the future needs of a party may include costs associated with caring for a child, especially where the parties’ contributions in this regard have been in unequal proportions, where one of the parties or children have ongoing health issues which need to be taken into consideration, as well as where there is likely to be income disparity between the parties or even where there is an age difference. Once the contribution percentage is adjusted, this will then be applied to the net asset pool in order to determine the division of property as a dollar figure.
4. Is the outcome fair and equitable?
The final step in a Court’s process is to determine the practical effect of the proposed property settlement and whether it is just and equitable. If it is, the process is concluded. If it is not, an adjustment is normally made to achieve a just and equitable position. For example, an adjustment may be required where one of the parties is the sole carer of the children and is responsible for supporting those children.
Once the dollar amount that each person is to receive is known, the amount is converted into assets that are to be retained by each of the parties. This may involve a deduction of liabilities that would be retained in order to determine if a payment is required.
Property settlement proceedings can be complex. It is imperative that you are aware of all your obligations and entitlements, as well as the process in general.
If you would like further information regarding property division or if you have any general family law enquiries, please do not hesitate to contact Etheringtons Solicitors on 02 9963 9800 or via our contact page.