If you and your partner separate, you must consider what will happen to the property you own and how it will be divided between the two of you. The process of deciding what assets, financial resources and liabilities to divide is known as a property settlement.
Property settlements can be done between parties have been married as well as couples who have been in a de facto relationships. A property settlement can be dealt with between the parties, or with the intervention of the court. In this blog, we discuss property settlements, particularly in relation to what happens to superannuation during the property settlement process.
What is property?
It is commonly accepted that property can include, but is not limited to, physical property, money, superannuation entitlements, inheritances and business interests.
What happens to superannuation in property settlements?
Superannuation is commonly included in property settlement matters. This may be undertaken by way of an agreement between the parties, which can be implement through Consent Orders or a Binding Financial Agreement, or by the intervention of the court.
However, it is important to note when dealing with a superannuation interest, the first step is to ascertain the value of the superannuation interest. In most situations, this will be done according to various methods set out in the Family Law (Superannuation) Regulations 2001. A particular method to be used in each individual case will depend on the superannuation fund. If the parties are dealing with a fund for which there is no specific method of valuation provided in the Regulations, the court will determine the value as it considers appropriate. Once the superannuation is valued, it is included in the property pool (assets that arose out of the relationship) either amongst the other assets or as a separate list, depending on particular circumstances.
Once the superannuation fund is valued, it can then be ascribed a value in the matrimonial property pool and can be dealt with by way of a consent order. A consent order is a written agreement that is approved by a court, which can finalise financial arrangements between the parties. A consent order can contain provisions that the parties retain their personal superannuation entitlements, or that a portion is to be split to the other party. In the event that the superannuation entitlements of one party are to be divided, this is to be carried out by way of a ‘splitting order’.
A splitting order can be achieved by an order which allocates either an amount or a specified percentage from that party’s superannuation interest to the other party, which subsequently directs the trustee of the superfund to transfer their newly created entitlements into a separate superannuation scheme.
In some cases, it is unpractical to determine the splitting of superannuation entitlements at the same time when other property issues are being dealt with. Such a determination may need to be postponed until a later stage in the proceedings because of certain difficulties with respect to the valuation of superannuation interests.
It is vitally important to understand how superannuation will be dealt with in your family law proceedings. If you would like more information on how we can assist you with your property settlement or if you have any family law general enquiries, do not hesitate to contact one of our family law solicitors on 9963 9800 or at via the contact form here.
Following the breakdown of a marriage or de facto relationship, separated parties must consider how to divide joint property. It is crucial to understand each party’s ability to claim entitlements in a property settlement and the assets they are likely to retain.
Family law is a complicated and emotional area of law which is often poorly understood. This is reflected in a great quantity of inaccurate statements often regarded as fact by those in the community. This blog will debunk several of the property settlement myths and provide you with an understanding of the factors a court will consider to resolve a property settlement dispute.
The myth of a 50/50 split
Contrary to popular belief, there is no presumption that assets should be divided 50/50, 60/40 or in any other subjective proportion. The Family Court always has full discretion to divide property in a proportion that is just and equitable for both parties.
People often receive ‘advice’ from well-meaning friends or family as a result of their own experiences. However, no two cases are decided the same and there is no presumption of any kind in relation to a financial settlement when it comes to percentage entitlements. Comparing another person’s property settlement outcome to your own can be misleading and unhelpful when it creates a false expectation or entitlement.
Each property settlement situation is different and should be carefully assessed by a family lawyer qualified to provide you with proper advice.
Factors to be taken into account by the court
The Family Law Act outlines what factors must be taken into account when the courts consider how property is to be divided. There is no universal equation applied to calculate the weight given to each factor. Property settlement is based on all of the information provided and the discretion of the court in deciding the matter.
To decide how to distribute the assets the court will normally take into account factors including:
- The current value of the assets and liabilities to establish a ‘net asset pool’. This includes superannuation entitlements, as well as assets held personally, in partnership or trusts, or by companies.
- The direct financial contributions made by each person to the acquisition of assets or the preservation, improvement or maintenance of those assets. This will include assets owned at the commencement of the relationship.
- The indirect financial contributions made by each person in the relationship, for example, the giving up of a career to allow the other person to further their own career.
- The non-financial contributions by each person, like caring for children, being the homemaker and maintaining or improving the assets by personal exertion such as individual efforts in renovations that increase the value of an asset.
- Identifying the future needs of the parties, for example, age, health, financial resources, superannuation, care of children and income earning capacity.
After considering all of the above factors and others, the Court will consider whether any proposed property settlement is ‘just and equitable’ in the circumstances of the particular case.
The outcome cannot be predicted since no particular factor is given priority over another. For example, someone who is the sole income earner will not necessarily be entitled to a greater financial settlement than the other person who was a stay-at-home parent to the children of the relationship.
It is important to remember that there is no presumption of equality (like a 50/50 split) as a starting point in respect of contributions and that each matter will be decided upon the particular circumstances of that case. The Family Court has broad powers to make orders for a just and equitable division of assets.
It is important for anyone considering separating from their spouse, or who has already separated, to obtain independent legal advice from an experienced family law practitioner about their likely property settlement entitlements.
If you would like advice, guidance or assistance about property settlement entitlements following the breakdown of a marriage or relationship, contact Etheringtons Family Lawyers in North Sydney on (02) 9963 9800 or via the form here.
If you have been involved in family law matters, then you may be familiar with the section 75(2) factors. This section of the Family Law Act relates to adjusting a property settlement based on the contributions of the parties. It also considers factors which can “soften” the effect of looking at a property settlement. In this article, we break down what section 75(2) factors are and explain what they mean for you.
What is Section 75(2)?
This section of the Family Law sets out numerous factors that the Court may take into account in deciding how to distribute property in property settlements.
What are the Factors?
Section 75(2) of the Family Law Act 1975 (Cth) sets out numerous factors that may be taken into account by the Court in property settlements when determining whether there are any special circumstances that require adjustment to the property settlement amount.
The factors are:
- The age and state of health of each of the parties Income, property, finances and ability to earn an income.
- Whether either party has the care or control of a child of the marriage who is under 18.
- Commitments relating to support of themselves, a dependent or other person.
- Eligibility for a pension, allowance or benefit.
- Whether the parties have separated or divorced.
- The extent to which payment of maintenance could enable further education and therefore increase one of the parties earning capacity.
- The effect of any proposed order on the ability of a creditor of a party to recover a creditor’s debt.
- The extent to which one party has contributed to the income, earning capacity, property and financial resources of the other party.
- How the length of the marriage affected the earning capacity of the party seeking maintenance.
- The need to protect a party who wishes to continue their role as a parent.
- Financial circumstances of any current cohabitation by either party.
- Orders made under Section 79 of the Family Law Act, if any. This section regulates how assets are to be divided.
- Any child support that one of the parties is liable for.
- Any fact or circumstance which the court feels needs to be taken into account for reasons of justice.
- The terms of any financial agreement binding on the parties to the marriage.
What Do They Mean for You?
If you are going through a separation, it is important to understand what these factors mean for you. These factors are important for the court’s consideration and assessment of what each party’s ‘future needs’ are likely to be.
This requires the court to anticipate what each party’s life is likely to look like in the future and award a percentage uplift to the party with the greater ‘need’. As seen above, there are many factors that the court will take into consideration when deciding who gets what portion of the assets. It is therefore important to understand that property settlements can become quite complex.
If you would like to discuss your family law matter with one of our family lawyers, please contact us on 9963 9800 or at via our contact form.
It is important during a breakdown of a relationship or marriage both parties consider the issue of separating assets and liabilities. It goes without saying that separation is often a time that is highly emotional and stressful, however it is almost always a significant life changer as it may leave the vulnerable with significant financial strain.
Often long term de-facto relationships and marriages involve jointly owned assets, including properties, home contents and motor vehicles that have been accrued during the relationship or contributed by one party.
It is common for most couples to be able to agree on how shared assets should be divided (known as a “property settlement”), and arrangements may involve the jointly owned property being sold and the proceeds divided, or the joint property being transferred into one of the parties’ sole names. Whichever it may be, it is advisable to formalise the property settlement agreement in a legal document. The main reasons for doing this are to:
- Ensure that the agreement is clear and concise and legally binding.
- Achieve a sense of closure.
- Ensure that neither party can make a claim on the other in the future and thus obtain certainty.
- Achieve an exemption from stamp duty when transferring a piece of property to the other party.
In some cases, couples are unable to agree on how assets and liabilities should be divided. When this occurs, it is best to seek legal advice from a solicitor to be informed of your rights and to allow for negotiations to occur with your former spouse. Unfortunately, where agreements simply cannot be reached through negotiations or alternative dispute resolution, the only available avenue is to proceed to court.
Why seek legal representation?
People who have gone through a separation are often more satisfied with the outcome in the circumstances where they can mutually agree on it, whether that be through negotiation or between themselves with minimal legal intervention, as opposed to a court judgment.
We know that a mutually beneficial and cost-effective resolution is the most desirable in the circumstances. If you would like more information on how we can assist you with your property settlement matter or any other family law matters, do not hesitate to contact us on 9963 9800 or via the contact page form here.
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.