Working out who gets what in a property settlement can be a tedious and emotionally-taxing task in an already difficult time. Whatever your situation, you’ll have to record and value your shared property before attempting to distribute anything. But how are assets divided in a divorce in Australia?
When it comes to understanding how property settlements are worked out, it’s important to note that our Family Law system is discretionary. In other words, each Magistrate or Judge is permitted to apply governing principles as they see fit, rather than adhering to rigid legislation.
This element adds an additional layer of complexity when determining what each party is entitled to in a property settlement. If your assets are relatively straightforward to split, you may be able to reach an agreement informally or through mediation. However, more convoluted circumstances may require Court intervention.
At Affinitas Legal, our property settlement lawyers have extensive experience in supporting clients to handle their financial matters after relationship breakdown. Below, we explain how assets are divided in a divorce in Australia so that you can better understand your property settlement entitlements and responsibilities.
What is a property settlement?
A property settlement is a legal document that details the financial arrangement made between former spouses. A vital step after parting ways, it confirms the terms of your divorce, such as property division, spousal maintenance.
Note that, strictly speaking, you do not need to divorce to resolve your property settlement matters in Australia.
What counts as an asset in a property settlement?
Any assets owned by you and your former spouse are viewed as ‘marital’ property – whether held jointly or separately. Additionally, even assets earned by one person before your relationship that are then brought into the marriage can potentially be divided in your settlement.
As a result, assets that may be considered in a property settlement include:
- Real estate
- Bank accounts
- Investments
- Insurance policies
- Superannuation
- Inheritances
- Shares
- Family trusts
- Superannuation
- Vehicles
- Personal belongings such as jewellery
Debts owed by you and your former spouse are also considered during a property settlement, and may include credit cards, loans, mortgages and personal debts.
How are assets divided in a divorce in Australia?
There is an age-old misconception that assets are divided 50:50 following divorce. In actuality, the Family Law Act’s principles for property settlement do not mention equal asset division between parties at all. As every divorce has its own unique circumstances, the Court will consider multiple factors when determining how to distribute your assets fairly.
What you are entitled to in a divorce depends on the following considerations:
- The value of your property pool
- The contributions of each party
- The needs of each party
- Just and equitable division
The value of your property pool
First, the Court will consider how much your entire property pool is worth. For this crucial starting point, you will need to calculate the total value of all marital assets and debts held in joint or sole names.
This step can be challenging depending on the complexity of your property pool – for instance if self-managed super funds or family trusts are involved. To ensure full and frank disclosure of your financial situation, you must confirm current values for your:
- Real estate
- Monthly income
- Investments
- Savings accounts
- Insurance policies
- Superannuation
- Business assets
- Shares
- Family trusts
- Physical valuables
- Assets that are likely to be obtained in the future
- Debts such as outstanding tax bills, credit cards, loans and overdrafts
Past contributions
Next, you will be required to work out the financial, non-financial and homemaker contributions that each party has brought to the relationship.
Financial contributions
Determine any economic contributions either of you have made to buy, upkeep or increase your property pool. Financial contributions can be further categorised into those that have been paid for:
- Prior to your relationship
- Throughout your relationship
- After your relationship
Non-financial contributions
These cover any non-monetary contributions either of you have made towards the maintenance and improvement of your property pool.
Homemaker contributions
Lastly, homemaker contributions refer to daily household duties and any notable actions, such as quitting your job or going part-time in order to dedicate more time to childcare.
Current and future needs
The third consideration assesses the current and future needs of both parties, a step that will require you to not only determine existing requirements but also those you expect to face in the future.
In order to work out your needs, give thought to the following factors:
- The age of each party
- The physical and mental health of each party
- How much income each party earns
- Childcare arrangements between parties
Just and equitable division
Finally, the Court will determine whether the resulting property settlement is just and equitable – asset division must be fair to both parties.
While property settlement calculations can potentially lead to a 50:50 split, it’s generally the case that one party receives a larger share of assets.
Do we need to go to Court to divide assets in a divorce or de facto separation?
No, you only need to go to Court to divide assets in a divorce or de facto separation if you are unable to reach a fair agreement by other means.
In Australia, assets are most often divided using an agreement between both spouses. If you cannot reach an agreement, you can try mediation, whereby an independent mediator will work with you to resolve any disputes. If both methods prove futile, we advise seeking the support of an experienced family lawyer who will help you to negotiate an agreement.
Once you have agreed on how to divide your assets, you can either:
Get a Consent Order from the court
Lastly, you can get your written agreement approved by the Court, in which case it is known as a Consent Order and has the same legally-binding effect as a Court Order. You must apply for Consent Orders in the Family Court of Western Australia. Before issuing the Consent Order, the court will review whether the proposed agreement is fair.
Remember you only need to go to the Family Court and have a judge decide how to split your assets if your previous efforts have been unsuccessful. As going to Court can be a time-consuming and costly process, we strongly encourage you to reach an agreement before your settlement gets to this stage.
Make a financial agreement
A financial agreement is a written document detailing how you plan to split your assets. While you do not need to get this agreement approved by the Court, you must follow specific rules when creating your financial agreement and therefore should seek legal advice.
Learn more about what a Binding Financial Agreement is.
Get trusted legal support with your property settlement
Understanding how assets are divided in a divorce in Australia is central to reaching a fair agreement that will please both you and your former partner.
Although you may have opposing stances at points throughout the process, your property settlement can go smoothly if you are both committed to following the Family Law Act’s guidelines and respecting each other’s entitlements.
What’s more, our Perth property settlement lawyers are here to help you navigate the legal complexities of asset division so that you can focus on starting the next chapter. If you have already reached a property settlement, we can provide you with personalised advice on the best way to finalise your agreement.
