After the breakdown of a relationship a couple needs to work out how to split their assets (property) and liabilities (debts), a process and outcome also known as a “property settlement”.
If a separated couple fully agree on how property and debt should be divided they do not need to involve the courts, however a couple can seek a “consent order” in the Family Court to formalise their agreement.
If however a couple cannot reach agreement they can apply to a court for “financial orders” to divide property and debt (orders can also cover payment of spouse or de facto partner maintenance).
What counts as assets or “property”?
Apart from obvious things like the family home, cars, jewellery and superannuation, “property” is broadly defined by the Family Court to also include things like:
- property owned in the name of only one party (for example an investment property)
- an interest in a business or company
- assets owned prior to the commencement of the relationship and assets acquired after separation
- future entitlements (like an inheritance).
Assets are balanced by the Family Court against debts (liabilities), and include things like:
- car and credit card loans
- tax debts
- money owed to other third parties.
Isn’t it all just split 50/50?
It is important to understand that the Family Court does not use a set formula to divide property; each case is reviewed by a judicial officer.
It is impossible to know in advance precisely what orders a judicial officer will make. The decision is made after all the evidence of both parties is heard and the judicial officer decides what is “just and equitable” based on the facts of your particular situation.
How does the Family Court decide how to divide property and debts?
The Court will first identify all the property and debts from the relationship (and often prior to the relationship and following separation). Complexity enters the picture if family trusts, businesses or self-managed super funds are involved, or if one of the parties has not disclosed an asset or tried to hide wealth.
Then the Court considers all of the contributions made by both parties during the relationship in three areas:
- direct financial contributions (for example: salaries)
- indirect financial contributions (for example: gifts)
- non-financial contributions (for example: caring for children).
Finally the Court reviews future ongoing requirements of both parties (for example funding care of children, health, and ability to work).
A decision is made by a judicial officer after all the evidence is heard relating to your case. Because the factors considered by the Family Court vary enormously between couples, and no one factor carries a set weighting, there is no established formula that can be relied upon to determine how property and debt may be split.
If you are concerned about what you are entitled to, or what debts you may be liable for, it is important to obtain legal advice as early as possible to fully understand your situation and what the best options are for you and your family.
There’s no time to waste - time limits apply to property settlements
It is also important to know that the Family Court has mandated time limits on property settlements.
If you were married, applications for property settlements must be made within 12 months of your divorce becoming final.
If you were in a de facto relationship (for at least 2 years) your application must be lodged within 2 years of the breakdown of your de facto relationship.
Special permission is required from the Court if you do not apply within these time limits, but it is not always given.
How can Preston Law help?
Preston Law believes everyone deserves access to good legal advice and representation, which is why we offer:
- An obligation free initial consultation, so you can identify the best options for you and your family.
- Deferred payment options*, so you don’t have to deal with legal fees until you have reached settlement.
*Conditions apply. It’s quick and easy to find out if you’re eligible, so give us a call.