The process adopted by the Court for property settlement in Australia of a de facto relationship or marriage is usually a 4 step approach namely:
- Identification of the net asset pool to be divided. This involves a consideration of the assets, liabilities and financial resources of each party,
- Determining what contribution each party has made to the asset pool,
- Determining the future needs and other available resources of each of the parties. The future needs factor means that the Court must consider that ages and health of the parties, whether either of them has the care of a child of the relationship, each of their mental and physical capacities for employment and their potential income,
- Fourthly, considering the justice of the proposed division of the asset pool.
The Family Court has a preference to look at the overall position, rather than an asset by asset approach. The law allows the Family Court a discretion which approach to adopt in making an order for division of the asset pool.
Each or the parties financial and non-financial contributions are considered by the Court, so a stay at home mum’s non-financial contributions to the household are equally as important as a working partner’s income. After consideration of the future needs of the parties the Court may give the party with the lower earning capacity a larger share of the asset pool.
The law imposes on both parties to a property settlement an obligation to properly disclose their financial affairs. The obligation to properly disclose financial affairs is a continuing obligation. Financial affairs includes income, any vested interest in property, any interest in property owned by a separate entity that is owned or controlled by a party to the relationship, income earned by an entity owned or controlled by a party to the relationship, details of any trust and details of the disposal of any property in the 12 months prior to separation or since separation. Debts are also required to be disclosed.
Another relevant considerations are, for example, where funds in existence at separation have been spent by one of the parties for that party’s benefit since separation. The generally adopted rule is that those funds are added back to the net asset pool, albeit on paper. This is called an “Add back”.
The 3 main categories of “Add backs” are :-
- Waste – This is where a party either intentionally or recklessly acts in a manner which causes a reduction in the asset pool. The wasted money can be added back for the purpose of considering the distribution of the asset pool.
- Spending money or disposing of an asset – If a party spends moneys which existed at separation or disposes of an asset after separation, the value of the asset or the money can be added back to the asset pool.
- Legal Fees – Similarly if a party uses joint moneys to pay his or her legal fees, those moneys can be added back and be considered in the division of the asset pool.
This is a general overview only. Please contact our office for more detailed information.