In Australia, almost one-third of the relationship ends in divorce or separation. Due to the number of relationships ended up poorly, there are several common myths regarding the proportion of entitlement in a property settlement after a divorce.

 

Common misunderstanding and myths

Everything is divided into a 50/50 basis – There is no 50/50 rule in family law property matter in practice. Every case has different proportions of entitlement in the property settlement. The court has discretionary power to set the ratio based on considering factors that are addressed in the Family Law Act.

 

The court is necessary for the property settlement – You do not have to go to the court to deal with the property settlement. The statistics show that only around 5% of couples who break down their relationship ended up in court. The rest of the couples are resolved by way of consent, a mediation, or by negotiation between each party’s solicitors.

Once both parties agreed on how to divide the assets by consent, the either party can apply for the Consent orders. The court will then review and approve the agreement. In this circumstance, there is no involvement of the court in the property settlement and both parties satisfy with the result.

 

No-fault basis – Under Family Law Act, there is no fault jurisdiction, which means the court does not require to know the relationship was broken due to whose fault or affair.

 

Property settlement – The Four-step process

The first step – Forming a property pool

Formation of the property pool is very important as it sets out assets, liabilities, and superannuation interests that will be distributed between both parties. Therefore, Identification of these must be conducted thoroughly and in due diligence. It is irrelevant that assets, liabilities, and superannuation interests are held by one party’s name or joint names or between one party and the third party. Both parties have an obligation to produce full and frank disclosure to each other for transparency of the property pool.

 

The second step – Determine each party’s financial and non-financial contributions to the relationship

The following step is to evaluate each party’s contribution made before and after the marriage to the property pool and to the welfare of the family.

 

Unless there is a big difference in the initial contributions prior to the marriage between the couple, the initial contribution will not be considered significantly. Even if there is a difference in the initial contribution of property between the couple, there is a number of factors to be considered such as duration of the marriage, post contribution to the marriage and future needs. For example, if there was a long-term relationship, the initial contribution would not play a significant role. However, it is a different story if the enormous difference in the initial contributions and those assets still represent a significant part of the property pool at the end.

 

The contributions during the marriage can be, but not limited to:

  • Financial – Income/wages, financial assistance from parents, damages, windfalls, and superannuation.
  • Non-financial – repainting the home, landscaping the property and labour into the renovation to improve property value.
  • Homemaker – the welfare of the family, carer for children and stay-at-home parents.

 

Third Step – Establishing future needs

There are a number of considerations made: future earning capacities, state of health of each party and children if any, age and number of children, which party is primarily responsible for caring for the children, the length of the relationship whether it affects any party’s earning capacities and others. The ratio for the property settlement will be adjusted at this stage again.

 

Fourth step – Just and Equitable

The court will consider and assess the agreed division of the property is ‘just and equitable’ in all of the circumstances of each case; even though both parties agreed on a 90/10 ratio for the property settlement, the court will be unlikely to give a Consent order unless the circumstances show that is ‘just and equitable’.