When a couple divorces in Australia, the marriage assets must be divided between the two parties in a just and equitable way. This division is usually written down in a Binding Financial Agreement that is negotiated between the parties (and usually their legal representatives). Alternatively, if the couple cannot come to an agreement privately, they can apply to the Federal Circuit and Family COurt (FCFCA) for a consent order or court order. In the case of an application to the court, a judge will assess the financial circumstances of the couple, including their pool of marital assets and the respective contributions of each partner. The law that governs the division of marriage assets in Australia is the Family Law Act 1975. This article examines the process whereby marriage assets are divided between divorcing spouses.
Filing an Application With the Court
A couple must make a sincere attempt to reach an agreement privately before they apply to the court for a consent order or court order. If an agreement is made privately between the couple, consent orders can be drawn up outlining the terms of the agreement. This agreement must then be filed with the court, and if the court finds that the agreement is fair, it will be approved and the orders will become binding and enforceable.
Both parties are obligated to produce an honest account of their assets and liabilities, including all earnings, income, interest, property, and other monetary resources. The duty to disclose endures until the case is finalised, and failure to disclose can result in an order being set aside.
Time Limits for Property Settlements
There are time limits to arrange marital property settlements: an application for a financial or consent order must be made within one year of the date of the divorce order. An application for property settlement can only be made after this date in exceptional circumstances.
How Does the Court Divide Assets?
The ultimate priority of the court is to reach a fair and equitable outcome. Once all the assets of the marriage have been identified, the court will consider the level of contribution made by each party in the acquisition, maintenance and conservation of the asset. The court will examine the distributions, both direct financial contributions and non-financial contributions, made by each spouse to the marital assets. It will also look at the future needs of both the parties, including the amount of time that each will spend caring for children, the health and mental wellbeing of each party, and their employability. The court may weigh these factors in any fashion it deems appropriate.
Marriage assets incorporate all earnings received during the relationship, and everything purchased with those earnings. Importantly, it also includes any debts acquired during the marriage. Types of assets incorporated in the asset pool are those in the name or control of one party as well as jointly owned assets. Typically this only includes assets that were held at the time of separation, except where an existing asset was used to purchase a new asset (for instance, if cash from the marital pool is used to purchase a property).
Superannuation as Marriage Asset
Since 2003 the courts have considered superannuation a marriage asset, and therefore part of the asset pool for distribution in accordance with the rules of superannuation funds. There are several ways that superannuation can be treated in the marriage asset property pool. The contributing member can retain the whole benefit, but receive a lesser share of other assets. The court can also make a “splitting order”, whereby a fund is divided between the couple in a specified amount or percentage. Alternatively, the court can make a “flagging order”, so that when the superannuation fund matures, an agreed amount will be distributed to the other spouse.
Is a Trust Considered a Marriage Asset?
The court views assets held in a trust much like any other marriage asset, in that they will be considered shared assets unless one spouse has maintained total control over the trust, in which case the court may decide in favour of the controlling party. The court will consider whether either of the spouses has benefited from the trust, in the form of expenses, salary, or a loan. They will also look at the history of transactions and how the parties have previously treated the trust.
Are Inheritances Considered Marriage Assets?
The timing of the bequest is the most important factor in deciding whether an inheritance is a marriage asset. For example, if one spouse receives an inheritance while the couple is still married, the inheritance may be seen as a financial contribution from the recipient. This will especially be the case if the inheritance was invested in the family on items such as home renovations and holidays. An inheritance received early in a marriage may be irrelevant in light of other contributions made over the life of the marriage. An inheritance received later in a relationship or after separation is not typically included in the asset pool, unless the pool is too small to assure a fair settlement for both parties.
If either spouse receives money through a windfall, such as a gambling win, this is usually considered joint income and part of the marriage asset pool.
If you need advice about the division of marriage assets after a divorce, Armstrong Legal’s family law experts can help. Please call Armstrong Legal on 1300 038 223 or send us an email to make an appointment with one of our friendly, professional family lawyers.