Property Settlement Upon Separation in Australia

19 May 2023

Property Settlement Upon Separation in Australia

Your Online Legal Group Team
Your Online Legal Group Team

The Key Points

The division of property assets is one of the most significant and contentious issues in any separation or divorce.

In Australia, property settlement is governed by the Family Law Act 1975, which mandates that property be divided fairly and equitably between separating couples.

However, this does not necessarily mean that property assets will be divided equally between the parties involved.

In this blog, we will explore why property assets are not always divided equally between separated couples in Australia.

We have another great blog on 70/30 Divorce Settlement and the critical factors that lead to an unequal division of assets in a property settlement. TAKE A READ HERE

The concept of “just and equitable” division

Under Australian family law, the division of property assets must be “just and equitable” in all the circumstances.

This means that the court must consider a range of factors when determining what constitutes a fair and equitable division of property.

These factors include the financial contributions made by each party, the non-financial contributions made by each party, and the future needs of each party.

Financial Contributions

 

One of the primary factors that a court will consider when dividing property assets is the financial contributions made by each party.

This includes direct financial contributions such as income earned, property owned, and assets purchased.

It also includes indirect financial contributions such as gifts or inheritances received and financial support provided to the other party.

for example if they were supported during a period of study which has enhanced their future prospects/earnings

Where one party has made a significant financial contribution, they may be entitled to a larger share of the property assets.

For example, if one party has made a large initial contribution to a property brought into the relationship, they may be entitled to a greater share of the property assets.

 

Non-Financial Contributions

 

 

Non-financial contributions are also considered when dividing property assets.

This includes the contributions made by each party in caring for the family, raising children, and maintaining the home.

Non-financial contributions are particularly relevant in cases where one party has given up their career to care for the family or where one party has made significant contributions to the household but has not earned an income.

In these cases, the court may award a greater share of the property assets to the party who has made significant non-financial contributions.

However, we often find in most households that where one party worked/earned more than the other, one was in charge of home duties/parenting; then the financial and non-financial contributions are assessed as equal.

Future Needs

 

Another important factor in property settlement is the future needs of each party.

This includes factors such as the age and health of each party, their income and earning capacity, and their financial obligations.

Where one party has greater financial needs or fewer resources to support themselves after the separation, they may be entitled to a greater share of the property assets.

For example, if one party has health issues that prevent them from working, they may require a larger share of the property assets to provide ongoing financial support.

Similarly, if one party has a greater financial burden, such as meeting significant debts of the relationship post separation, they may require a larger share of the property assets to meet these ongoing financial obligations.

 

Fairness and Equity

While the court will consider a range of factors when dividing property assets, the ultimate goal is to achieve a fair and equitable outcome for both parties.

This does not necessarily mean that property assets will be divided equally between the parties.

In some cases, an equal division of property assets may not be fair or equitable based on the specific circumstances of the case.

 

Property Ownership and Agreements

 

The division of property assets is sometimes, to an extent, influenced by the ownership of the property and any agreements that may be in place between the parties.

If one party owns or contributes an asset, whilst this may not impact how the overall assets are divided a Court may decide to allow that party to retain that asset as part of their “share”.

Similarly, if the parties have entered into a prenuptial or postnuptial agreement that outlines how property will be divided in the event of separation, this can also influence the division of property assets.

However, it is important to note that prenuptial and postnuptial agreements are not always binding and can be challenged in court if they are deemed unfair or completed where one party was under duress or are not prepared in accordance with the requirements of the Family Law Act (such as each party has independent legal advice).

 

Legal and Financial Advice

In any property settlement, it is important for both parties to seek legal and potential financial advice.

A family lawyer can provide guidance on the factors that are relevant to the division of property assets and can assist with negotiating a settlement that is fair and equitable.

Financial advice can also help parties to understand their financial situation (including matters such as Capital Gains Tax) and what their future financial needs may be.

 

Mediation

Couple in mediation
Couple in mediation sorting out property settlement.

Mediation can also be a helpful tool in negotiating a property settlement agreement.

In mediation, a neutral third party facilitates discussions between the parties involved in order to come to a mutually agreed-upon settlement.

This can be particularly helpful in cases where there is a high level of conflict or where the parties are struggling to communicate effectively.

During mediation, the parties have the opportunity to discuss their concerns and needs in a safe and confidential environment.

The mediator can assist the parties in identifying their key issues and in exploring various options for resolving those issues.

This can help the parties to come to a settlement that is tailored to their unique circumstances and that meets the needs of both parties.

Mediation can be a more cost-effective and efficient option than going to court, and it can also be less stressful and emotionally taxing for the parties involved.

By working collaboratively in mediation, parties can often achieve a more positive and constructive outcome than they might in a court setting.

Collaboration Approach

 

A collaborative approach through solicitors can also be effective in reaching a property settlement agreement.

This approach involves both parties retaining their own solicitors, who work together in a cooperative and transparent manner to resolve the issues at hand.

The goal is to reach a settlement that is fair and equitable for both parties, while avoiding the expense and stress of going to court.

During the collaborative process, the parties and their solicitors meet together to identify the issues that need to be resolved and to discuss possible solutions.

The solicitors work together to ensure that the parties are fully informed about their rights and obligations, and they assist in negotiating a settlement that meets the needs of both parties.

One of the key benefits of the collaborative approach is that it can be more flexible and creative than going to court.

The parties have the ability to tailor their settlement to their specific needs and circumstances, rather than being bound by the strict rules and procedures of the court system.

This can result in a settlement that is more satisfactory for both parties and that allows them to move forward with their lives in a positive manner.

Interestingly, in a collaboration approach if a final agreement is not reached it is common that each of the parties respective solicitors must “stand down” and not act further if the matter proceeds to Court.

This is to genuinely encourage the solicitors and their clients to avoid using the ‘threat’ of court to get in the way of cooperative negotiation.

Summary

In conclusion, the primary focus of division of property assets in Australia is that such property is divided fairly and equitably between separating couples.

While this does not necessarily mean that property assets will be divided equally between the parties, it does mean that the court will consider a range of factors when determining what it constitutes as the fair final outcome.

Ultimately, it is important for both parties to seek legal and financial advice as needed to ensure that they fully understand their rights and responsibilities in relation to the division of property assets.

By doing so, they can work towards a settlement that is fair, equitable and meets the needs of both parties involved.

Where does Your Online Property Settlement fit in?

Your Online Property Settlement provides assistance to separated couples in two ways:-

1️⃣ If the property division is relatively simple and can be agreed by the parties (even after getting some initial legal or financial advice) then Your Online Property Settlement can document that agreement in a final form and co-ordinate the transfer of any agreed assets which will change ownership- for example a jointly owned home to one party in exchange for a cash payment; or

2️⃣ Arrange a mediator to work with the parties to endeavour to reach a final agreement.

If the parties do reach an agreement the mediator will advise Your Online Property Settlement who can prepare that agreement in form for the parties to sign.

Asset transfers as noted above can also then occur.

Your Online Property Settlement provides a cost effective document preparation service to help separated couples (married or defacto) move on with their lives.

If you need further information then you can make enquiry at help@propertysettlementonline.com.au