Property Settlement

Link to:
Property Settlement
Property Contributions
Future Needs
Divison of Property
Court Orders
Binding Financial Agreements

Property Settlement     Return to TOP

Whether it is prior to marriage, during marriage, or following the breakdown of your marriage Paul and Paul Lawyers can assist you to put in place an arrangement that will settle financial matters between you and your spouse on a final basis and provide you with your financial independence.

Upon the breakdown of your marriage the adjustment of property interests is governed by Section 79 of the Family Law Act which is titled “Alteration of property interests”. Under this section the Court has a broad discretion to make orders adjusting the property interests of parties to a marriage where it is just and equitable.

When making orders for adjustment of property interests the Court where possible does what it can to bring to an end any future financial relationship between the parties.

The appropriate date for valuing the assets of the marriage is the date of the trial/court hearing not the date of separation, however the Judge does have a discretion to consider the financial history since separation before making a final determination.

The Court’s power, which is discretionary, is governed by Section 79(4) of the Family Law Act. This is in the following terms:

(4) In considering what order (if any) should be made under this section in property settlement proceedings, the court shall take into account:

1. the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last mentioned property, whether or not that last mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
2. the contribution (other than a financial contribution) made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation to any of that last mentioned property, whether or not that last mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them; and
3. the contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or parent; and
4. the effect of any proposed order upon the earning capacity of either party to the marriage; and
5. the matters referred to in subsection 75(2) so far as they are relevant; and
6. any other order made under this Act affecting a party to the marriage or a child of the marriage; and
7. any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provided, is to provide, or might be liable to provide in the future, for a child of the marriage.
   

In coming to a decision as to the alteration of property interests the Court adopts a 4 step approach, namely,

1. identify and value the assets, liabilities, financial resources of the parties;
2. identify and assess the contributions of the parties as set out in and determine each of the parties contributions as a percentage.
3. Identify and assess (if relevant) the factors in Section 75(2) and whether same require the percentage figure arrived at based on contributions to be adjusted.
4. Consider the effect of those findings as a whole and make orders that are just and equitable in the whole of the circumstances.
   

Of particular importance is Section 79(4)(e) which makes reference to what are commonly termed “Section 75(2) factors”.

The Section 75(2) factors are the factors to be taken into account in any spouse maintenance order made by a Court and any order as to alteration of property interests. They are broadly concerned with a party’s needs and means following the breakdown of a marriage.

Section 75(2) is in the following terms:

    (2) The matters to be so taken into account are:

1. the age and state of health of each of the parties;
2. the income, property and financial resources of each of the parties and the
   physical and mental capacity of each of them for appropriate gainful employment;
3. whether either party has the care or control of a child of the marriage who has not attained the age of 18 years;
4. commitments of each of the parties that are necessary to enable the party to
   support:
         i. himself or herself; and
         ii. a child or another person that the party has a duty to maintain;
5. the responsibilities of either party to support any other person;
6. subject to subsection (3), the eligibility of either party for a pension, allowance or benefit under:
         i. any law of the Commonwealth, of a State or Territory or of another
            country; or
         ii. any superannuation fund or scheme, whether the fund or scheme was
            established, or operates, within or outside Australia;
            and the rate of any such pension, allowance or benefit being paid to
            either party;
7. where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable;
8. the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income;
   

    ha.  the effect of any proposed order on the ability of a creditor of a party to
          recover the creditor's debt, so far as that effect is relevant; and
      j.  the extent to which the party whose maintenance is under consideration has
          contributed to the income, earning capacity, property and financial resources
          of the other party;
      k. the duration of the marriage and the extent to which it has affected the
          earning capacity of the party whose maintenance is under consideration;
      l.  the need to protect a party who wishes to continue that party's role as a
          parent;
     m. if either party is cohabiting with another person--the financial circumstances
          relating to the cohabitation;
      n. the terms of any order made or proposed to be made under section 79 in
          relation to:
             (i) the property of the parties; or
             (ii) vested bankruptcy property in relation to a bankrupt party;
    na.  any child support under the Child Support (Assessment) Act 1989 that a
          party to the marriage has provided, is to provide, or might be liable to provide
          in the future, for a child of the marriage; and
      o. any fact or circumstance which, in the opinion of the court, the justice of the
          case requires to be taken into account; and
      p. the terms of any financial agreement that is binding on the parties.

Property Contributions     Return to TOP

Section 79(4) provides for the Court to look at the history of the marriage. The Court is required to assess the parties’ contributions, both financial and non-financial, to the acquisition and maintenance of property, and also to the general welfare of the family i.e. to the marriage generally.

Section 79(4)(a)

This includes any financial contribution directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage.

Financial contributions are generally considered predominant in short marriages but it is generally the approach of the Court that in marriages of long duration the value of any initial contribution erodes over the years, especially when there are children.

In evaluating the parties’ respective interests the Court will have regard to whether a party has made “special” or “extra” contributions. Such issues generally arise when a party comes to the marriage with considerable wealth or exercises superior entrepreneurial skills, or receives an inheritance, or gifts or loans from relatives.

Superannuation is regarded as property and must be taken into account.

Section 79(4)(b)

The court also considers contributions of a non-financial nature. This includes unpaid labour to the improvement of property owned by the parties to a marriage. For example, physically carrying out renovations that have subsequently improved the value of a property, without payment.

Section 79(4)(c)

This provision is concerned with the contribution by a party to the marriage to the care and welfare of the family. In Wardman and Hudson (1978) FLC 90-466 the Full Court summarised this provision as follows:

“Clearly in our view in considering what order is just and equitable under Section 79 it would be wholly inappropriate not to give full and significant regard to the ordinary situation in the community, namely, a situation where the wife directs herself, particularly during the period when the children are young, away from outside employment towards the conduct of the home and the rearing that in ordinary circumstances that is a contribution in every way ought to be equally equated to the efforts of the husband who is thus freed to pursue his direction outside employment”.

This approach was expressly approved in the land-mark High Court and decision in Mallet in 1984.

Future Needs     Return to TOP

The relevant matters are set out in Section 79(4)(d)-(g).

These are additional factors that need to be taken into consideration by a Court when deciding what is a just and equitable division of property between the parties to a marriage.

In having regard to these factors the Court looks at what further adjustment may need to be made to the percentage otherwise seen as appropriate, based on contributions in favour of a party to a marriage who can demonstrate that such an adjustment is required.

An adjustment is often warranted in circumstances where one party to the marriage has remained out of the workforce and has attended to the needs and requirements of the family, and thus that person’s earning capacity and ability to obtain gainful employment has been affected, whilst the other party has had an opportunity to build his or her career. The most common ‘allowance’ is where one party has the primary care of young children.

Spouse maintenance and property adjustment are closely related, however for more on spouse maintenance please see our link titled Spouse Maintenance.

What is a likely division of property?     Return to TOP

The High Court has rejected the Family Court’s earlier approach that equality is the “starting point”. Each case must be decided on its own set of circumstances and due consideration given to Section 79(4), an evaluation of the parties’ respective financial and other contributions.

It may also be appropriate for there to be a further adjustment having regard to the provisions of Section 75(2).

Contact Paul and Paul Lawyers for advice on your rights and entitlement.

Property issues may be settled by way of Consent Orders made by the Family Court or by a Binding Financial Agreement where the Court need not be involved. In either case each party is required to obtain independent legal advice.

What are Court Orders?     Return to TOP

When you have reached agreement with your spouse, your agreement can be formalised and made binding by applying to the Court for Consent Orders to be made.

An Application for Consent Orders can seek orders in relation to:

• the care, welfare and development of your child/children (known as parenting orders)
• the division of property and/or maintenance for yourself and/or your spouse.

Consent Orders have the same legal effect as Court Orders made after a Court hearing by the Family Court of Australia or the Federal Magistrates’ Court, but Consent Orders do not usually involve any Court appearance.

A copy of your Marriage Certificate, or, if you are not married and are applying for parenting orders, a copy of your child or your children’s Birth Certificate(s) must accompany the Application for Consent Orders when lodged with the Court.

There is no filing fee involved in making an Application for Consent Orders.

What is a Binding Financial Agreement (“BFA”)?     Return to TOP

Apart from a Pre-Nuptial Agreement (made under Section 90B of the Family Law Act) there are 3 other types of BFA, namely:

1. One entered into during a Marriage but before Separation – Section 90C;
2. One entered into after Separation but before Divorce –also Section 90C; and
3. One entered into after Divorce – Section 90D.

You and your spouse are each required to be independently advised by a lawyer, each of whom must give a Certificate that independent legal advice has been provided to the client.

The Certificates of Independent Legal Advice must each certify that you/your spouse have been advised as to:

1. the effect of the agreement on your rights; and
2. the advantages and disadvantages of entering into the agreement at the time the advice is provided.
   

What needs to be done to prepare a BFA? What is its effect?     Return to TOP

1. You and your partner are required to make full and frank disclosure in the Agreement of your respective financial positions; and what each of you is to retain or receive by way of settlement.
2. Once the BFA has been executed and exchanged and a Certificate of Independent Legal Advice given by us on your behalf and by your spouse’s legal representative, then neither of you can make any Application to the Family Court to seek any Orders for property settlement, spouse maintenance or adjustment of superannuation interests which would result in any different settlement.
   

Why choose a Binding Financial Agreement?     Return to TOP

1. A BFA can enable you to quarantine for the benefit of your children from a previous marriage, or extended family, particular assets including pre-marriage assets or future inheritances.
2. A BFA provides you and your spouse with certainty as to what will happen in the event your marriage breaks down.
3. There is no involvement with a Court – a BFA is strictly a private and confidential arrangement.
4. A BFA avoids potentially costly, stressful and lengthy litigation;

Contact Paul & Paul Lawyers directly for further information as to how we can help you with your Binding Financial Agreement.

Complete the particulars and forward to us for review and advice. A small fee will apply.

It is often a good idea to also enter into a Family Provision Act Deed of Release in which you and your former partner/spouse both release/waive your respective rights to seek provision out of the other’s estate upon the death of either of you.