Dividing property- the law

When couples separate, one of the issues which generally has to be sorted out is how to separate the couple’s finances and divide the property. Some people may have just debts – for example credit card bills. Others may have substantial assets. People who have been working for some time in Australia usually have superannuation as well. Some general information about dividing property can be obtained from the Family Court’s website here.

The law

The law in Australia is rather complex. The judge has a very broad discretion to decide what is fair, and there are very few rules. This area of law is badly in need of reform to make the law clearer, and to ensure that judges apply it more consistently. If you have substantial assets, then it is important that you get good legal advice. It is usually best to go to a family law specialist, and if you cannot agree with your ex-partner, you may well be better off getting a family law expert to act as an arbitrator, than to spend a lot more money in the court system with a judge who may or may not be an expert in family property law. See arbitration.

In deciding how to divide property the court usually goes through a four step process. The main section of the law for married couples is here. The law is very similar for de facto couples and is here.

  1. Work out what the assets and liabilities are: The starting point for the court is to work out who owns what, and to put an approximate value on each item. The court also takes account of the main debts, such as a mortgage, or a substantial personal loan. For most people who have assets to divide there is typically a house, furnishings, a car or two, superannuation and perhaps a few shares. Some people have more substantial assets, including interests in family trusts, businesses or investments.
  2. Assess contributions: The court must examine contributions made directly or indirectly to the acquisition, conservation or improvement of property and to the welfare of the family as homemaker and parent. Marriage, and indeed many de facto relationships, are treated as a kind of partnership. Each person contributes in different ways. When there are children, it is common for one parent to give priority to the needs of the family while the other parent concentrates on bringing in the main income. In a situation where the couple both started out with very little, it is common for the court to conclude that their different contributions were equal. It is different if one of them brings a lot of property into the relationship or receives a substantial inheritance. There are no presumptions in the law, and it is particularly difficult to predict how judges will assess contributions when one of the spouses brings property into the relationship or receives an inheritance or damages award.
  3. Look to the future: The court must also consider the factors contained in s 75(2) of the Family Law Act (or s 90SF(3) for de facto relationships), so far as they are relevant. These are the same factors that the court must consider in making determinations about spousal maintenance. For that reason, the orientation is, for the most part, towards future needs, but other matters fall for consideration under this section as well, including superannuation rights.
  4. Consider whether there is a need to alter property rights, and if so, how: The judge should not alter the rights of each spouse in their property unless he or she considers it is “just and equitable” to do so, after considering all the circumstances. If it is fair to alter property rights, the judge must consider what orders to make  – it may mean that property has to be sold, or one person has to transfer money or property to the other. Superannuation entitlements can also be split.