Divorce and Property Settlement

When the court grants a divorce order this means that two people who are married are no longer married. A divorce is a separate legal proceeding from a property settlement and a parenting matter. Commonly, when parties separate, there are disputes to resolve around what arrangements should be made for the children and how property should be divided. This article sets out the process for determining property settlement.

Property settlements

To determine what property the parties to a relationship are entitled to after separation, a five-step process must be followed.

1. Is it just and equitable to make an order?

Firstly, the court will consider whether it is just and equitable to make an order. To do this, the law looks at the nature and length of the relationship. If a relationship is short and parties have kept their finances largely separate, it may not be just and equitable to make an order. If a relationship has been long and/or there was a high level of financial interdependence, it will be just and equitable to make an order.

2. Determine the asset pool

Secondly, parties must determine what assets are available to be split. This is done by adding the current value of all assets, including superannuation, and deducting any liabilities. It is not relevant whether or not the assets or liabilities are held in one name or joint names. They all must be included. If there is a dispute as to the value of any items, an expert can be appointed to have those items valued.

3. Determine each party’s contributions

Thirdly, the contributions of each party need to be evaluated. Contributions are considered as of the commencement of the relationship, during the relationship and post-separation are taken into account. 

The Family Law Act considers contributions including: 

• Financial contributions made directly or indirectly to the acquisition, conservation and improvement of property, such as mortgage repayments or gifts or loans from family. 
• Non-Financial contributions made directly or indirectly to the acquisition, conservation and improvement of property, such as renovations.  
• Contributions to the welfare of the family such as the care of the children and homemaker duties; and 
• The effect of family violence on a party’s ability to make contributions. 

It is important to keep in mind that whilst the Court will place weight as to the parties differing contributions, they also recognize that people fulfil different roles in relationships. For example, should parties take traditional roles in a relationship where one is the primary breadwinner and the other the primary carer of children or homemaker, then the Court will generally place equal weight to these roles. The reason for this is that it is accepted that one party was able to work and grow an income by the sacrifice of the other party remaining home.   

4. Determine current and future circumstances

Fourthly, the current and future circumstances of the parties are considered as to whether any further adjustment should be considered, particularly if those needs are unequal. The Court considers various factors including: 

• The effect of any family violence on the current or future circumstances of the other party;
• The age and state of health of the parties;
• The income, property and financial resources of the parties;
• The care of any children of the relationship under the age of 18 and the need to protect a party who wishes to continue their role as a parent;
• The responsibilities to support any other person;
• Eligibility for a pension, allowance or benefit and the rate it is paid;
• The effect of any material wastage; 
• Any current liabilities and how they were obtained. 

5. Determine the outcome

Fifthly, after reaching a final percentage split of the assets and applying it to the net asset pool at the first step you can work out in dollar terms what each of you is likely to receive. It then makes a value judgement to determine whether or not any further adjustment is necessary in order to achieve an appropriate result. Most cases do not require any further adjustment to achieve a just and equitable result after the percentages are calculated by looking at contributions and needs.

The final step to be undertaken is to determine who will keep what assets and liabilities. In most cases, each party will keep either what they own or what they have been using at the time of separation. If that position means that one person has more assets then they should, a cash adjustment is used in order to bring the final split of assets back into the correct proportions. It should be said that you do not need to wait until your divorce is finalised to split or divide your assets. It can be done immediately following separation.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.