How is property divided during separation?
Step One – Identify and value the net property of the parties.
- See our “property – preparation for your first appointment” factsheet
- See our Step by Step checklist
- Get a balance sheet handy
The starting point in any property matter is always to get together a list of your assets and liabilities. Include everything you can think of including superannuation and find out what it is worth/what is owed.
The Preparation factsheet gives you suggestions about different types of property and how to value it.
We call the list of assets the “property pool” and we talk about the “net property pool” – in other words the assets minus any liabilities. We talk about all the assets globally but often have superannuation as a separate “pool”.
To note –
- ‘Property’ pretty much includes everything that a person could own or have a legal interest in.
- In family law matters it doesn’t matter whether it is owned jointly or individually.
- Property owned before the relationship might be included in the property pool. Still provide the details about it and we can advise your further. For real estate, it is helpful if you can remember what is was worth, or what was owed at the time.
- Property owned before the relationship that is sold and used to the financial benefit of the parties, is taken into account.
- property inherited or received as a gift from a relative is taken into account. It counts as the contribution of the person who brought it in.
- property acquired after separation might also be included. Still provide the details about it and we can advise your further.
- Superannuation interests are property.
For information on how to have ‘property’ valued, see our “Property – preparation for your first appointment” factsheet.
Step Two – Consider the contributions of the parties
(Proviso – We talk about “what the court will do” as that is our benchmark, that is how we advise you. Please note, Collier lawyers will encourage you to think of going to court a last resort, so just because we talk about “court” doesn’t mean you should make an application to the court.)
What the Family Law Act says is that each party’s contributions, financial and non-financial, direct and indirect, to the “acquisition conservation and improvement of the property” is taken into account; as is each party’s contributions “to the welfare of the family, including as a homemaker and parent”.
Examples:
- An example of a direct financial contribution, is payment of the mortgage directly from your wage.
- An indirect financial contribution is paying other expenses which indirectly contributes to the mortgage, for example because it frees up the other person’s wage to be able to make the mortgage repayment.
- A direct non-financial contribution might be building a pergola.
- “homemaker and parent” contributions are exactly that.
- It has been the law for many years, that the contribution of the “breadwinner” is of equal value to the contribution of the homemaker/parent.
You should be aware that contributions are more often than not, considered to be equal. Just because you’ve paid the mortgage from your wage doesn’t mean you have made the sole contribution. Just because you made more money, doesn’t necessarily mean you will get a higher percentage of the property.
The longer the relationship, the more likely a court would say the contributions were equal.
Contributions are past contributions, from the commencement of the relationship, to the date of separation, and then from the date of separation to the current date.
Post separation contributions are taken into account. If you have paid the entire mortgage since separation then this is taken into account.
Step Three – Adjustments for future needs
In Step 2, the court looked at the past up until this point in time. In this third step, the Court looks at a number of different factors and decides whether to adjust the percentage decided at Step 2 up or down – or at all.
The factors the Court looks at are set out at Paragraph 75(2) of the Family Law Act and are:
- ages and health, respective incomes and earning capacities;
- whether a a party has the care of a child of the marriage,
- the length of the marriage and its effect on a party’s earning capacity;
- other property or financial respires a part has;
- if either party is cohabiting with another person–the financial circumstances relating to the cohabitation;
- child support paid;
- and so on.
The Step 2 percentage may be adjusted up or down – for example, at Step 2 the court might think the parties contributions were equal, so they get 50/50%. However, taking into account future needs, one party might earn much less than the other and have the primary care of young children. That party would expect an adjustment in their favour, the amount of which will depend on all the circumstances. This is why you hear about some parties getting “70%” of the property pool.
Or for example – Step 2- one party brought substantial property into the pool, so their contribution is assessed at 60% (for example) but, they have a great earning capacity and so the other party gets an adjustment of 10% – bringing the overall percentage to 50/50%.
Step Four – What is “Just and Equitable”
Finally, after coming to a decision about what percentage each party should receive the court looks at whether the outcome overall, is “just and equitable”. In practical terms when we advise you this is more like a “who gets what” step – how does the property get divided so that each party gets the percentage that is just and equitable.
Visit the Coller Family Law website or read more HERE.
