Settlement Short De Facto Relationship
The Family Law Act 1975 provides that a partner in a de facto relationship is entitled to a property settlement. However, this does not apply to de facto relationships that are shorter than two years, unless there was a child of the relationship, or one spouse made a “substantial contribution” to the couple’s asset pool during the short relationship. Even relationships that are up to five years in duration are considered short for the purposes of a property settlement. This article considers the circumstances when a property settlement is appropriate following a short de facto relationship of between two and fives years in duration.
Definition of De Facto
The Family Law Act defines a “de facto” relationship as between two parties who are not married but live together on a genuine domestic basis. The main factors that the court considers when deciding whether a relationship is de facto are the length of the relationship, the degree of cohabitation, and the extent of financial interdependence. The court also takes into account whether there was a sexual relationship, whether the couple had children, and whether the relationship was ever registered with the government. Even whether the community accepts the pair as a genuine couple can be a persuasive factor for the court.
What is a Substantial Contribution?
If a couple is considered genuinely de facto, but the relationship is less than five years in duration and there are no children, the court will usually assume that each party will leave the relationship with the assets that they brought into it. In essence, the court assumes that five years is too short a period to require a different distribution of assets. Demonstrating that one party made a “substantial” contribution to the asset pool can rebut this assumption. The word “substantial” in this context has been defined to mean “exceptional, beyond the usual or normal”.
A substantial contribution to a de facto relationship may be either financial or non-financial. For instance, the initial purchase of a house and repayment of the mortgage are financial contributions, and housekeeping and childrearing responsibilities are considered substantial non-financial contributions. The court assesses whether a contribution is substantial on a case-by-case basis.
Approach to Settlement in Short De Facto Relationship
The court can take two different approaches to a property settlement in a short de facto relationship. The first is an asset-by-asset approach, and the second is a global approach. The global approach entails assigning each party an overall amount (either an amount or percentage) of the total assets, while the asset-by-asset approach allows the court to determine each party’s interest in the individual items of property. The High Court has established that both approaches are valid, and although most matters in the Federal Circuit and Family Court (FCFCA) are dealt with in a global fashion, settlements in short de facto relationships are generally made on an asset-by-asset basis. This is because in a shorter relationship, it is usually a simpler task to identify the original owner of an asset, and the couple will typically hold fewer assets jointly.
Factors that are particularly important in assessing settlements in short de facto relationships include:
- If one spouse has made a large contribution at the start of the relationship whilst the other spouse has contributed comparatively little.
- If one party contributed an asset that significantly appreciates or depreciates in value during the course of the relationship.
- If the earning capacity of one spouse is far greater than the other, and both parties benefited from the increased standard of living for the short length of the relationship.
When the court assesses settlements for short de facto relationships, they assign greater weight to the assets that each spouse brought with them to the relationship (their “initial contribution”) than in settlements for longer relationships. These assets include property, cash, or other items of value. Initial contributions are evaluated according to pecuniary value, and the percentage that this represents of the total property pool. However, the value attached to the initial contribution may vary according to how the asset is used and maintained during the relationship. For instance, if one person owned a new home outright at the beginning of the relationship, then the current value of the home may be the sole contribution of this spouse. However, the situation is quite different if one spouse owned an un-renovated home and the other spouse extensively renovated it during the relationship: in that case, the original purchaser of the home does not gain the entire current value of the home as a contribution.
At all times, initial contributions are balanced against any substantial contributions that the other spouse has made over the course of the relationship. However, in a short relationship, there is typically less opportunity for one party to off-set an initial contribution by the other party, simply because of the more limited time frame. It is for this reason that settlements after short de facto relationships do not often dramatically adjust the distribution of assets.
Armstrong Legal’s family law experts can advise you about the possibility of a settlement after a short de facto relationship. If you have any questions on this topic or any other legal matter, please call us on 1300 038 223 or email to make an appointment.