Even though it’s been 45 years since the Family Law Act came into operation, most people are unaware of how property is divided when a marriage or defacto relationship ends. But that’s hardly surprising – it’s not something people have to deal with regularly. If you asked a Family Lawyer about brain surgery, you would get the same reaction – they know almost nothing.
This blog will hopefully clear up some misunderstandings about how Family Law property settlement (the legal process of dividing your assets) works.
So, let’s start at the beginning.
When a marriage or a de facto relationship ends (and the law treats them in almost the same way), there’s a 50/50 split of the assets and liabilities - right?
Wrong! Well, in most cases wrong. About the only time there would be an equal division of assets is where there are no children under 18 and the parties have approximately the same incomes (or are both retired).
What factors will move a property division from 50/50?
1. Children
The courts take the view that the parent who has the primary care of children of the relationship should be given a “loading” in a property settlement, to allow for the fact that they will be mainly responsible for housing, feeding, clothing and transporting those children, whereas the other parent has fewer responsibilities.
For example, if there are two children, aged 6 and 8, who live mainly with Mum, she and Dad both work but he earns more than her, the division might be 60-65% of all non-superannuation assets to Mum and 35-40% to Dad. Those assets would include the family home, any investment properties, businesses, shares, bank accounts, cars, boats, etc.
2. Income earning “disparity”
Whether or not there are children, if one party earns significantly more the other, the court may give the lower income earner more of the assets to compensate them for the fact that their ex-partner has a higher income.
3. Inheritances
If one party receives an inheritance during, or even after the relationship, that will be taken into account when the assets are divided up, and the party inheriting will receive a loading back in their favour. The more recent the inheritance, the more that person will get back.
If, for example, Dad inherited $50,000 15 years ago and that went into reducing the mortgage, he would get little or no credit for that, because it was so long ago. But if he got it in the last couple of years of the relationship, he would get most of it back.
4. Superannuation
That’s usually treated differently from other property, the idea being to equalise the parties’ super balances.
For example, if Dad has $200,000 in super and Mum had $75,000, you add them together, to get $275,000, divide that in half = $137,500. Mum already has $75,000 so take that off the $137,500 = $62,500, which is the amount that is “split” or transferred from Dad’s fund to Mum’s. That has to be done by a Court Order or a Binding Financial Agreement. Mum can’t access that until she reaches the statutory retirement age, unless she is in necessitous circumstances. Generally, the calculations are made based on the parties’ super built up from when they began living together until settlement. So, if either party brought super into the relationship, that is usually adjusted in their favour when working out the super split.
5. Lottery wins
The Courts have decided that, if a lottery ticket is bought by one party during the relationship, any winnings are treated as joint property.
6. Gambling losses
If one party incurs gambling losses of any significant amount during the relationship, these will usually be treated as “wastage” and taken off that party’s share of the assets to be divided up.
7. What if the house or other assets are only in one party’s name?
Normally, it doesn’t matter if joint funds were used to buy the asset or if one party made non-financial contributions (such as child care or homemaking).
8. Credit cards debts
These are generally treated as joint liabilities, no matter whose name they are in.
We hope this has helped explain the basics of Family Law property settlements. As you can see, it’s quite a complex area and the end result depends on a number of factors specific to your situation. That's why it is important to to seek guidance from an experienced family lawyer who can protect your best interests (and those of your children) when you are negotiating separation from your ex. Our highly experienced Family Lawyers at Tonkin Legal Group are here to provide that help, so book an appointment now.
