How does Property Settlement work in Australia?
Property settlement in Australia works by following a 4 step process as follows:
Step 1: Identify all the assets, liabilities and financial resources
Create a list of all the assets, liabilities and financial resources held in your name, the name of your former partner or jointly, and then for each item, place the current value or balance. If necessary, you should exchange documents and obtain valuation reports so that the list can be agreed between you and your former partner. This is known as a 'balance sheet' and represents the total net assets, including superannuation, which is available for division between you and your former partner. Property is defined broadly and comprises everything that you own including real estate, investments, businesses and superannuation.
Step 2: Assess the contributions made you and your former partner
Contributions can be direct and indirect, financial and non financial, and also relate to the care and welfare of the family. Contributions include those made before, during and after the relationship. Although there are some exceptions, the assessment of contributions is not a mathematical calculation of the contributions made. An overall percentage is determined based on the assessment of contributions overall.
The principles applied when assessing contributions include the following:
Contributions are relative to the length of the relationship. A large financial contribution at the beginning of a relationship will often be treated differently in a short relationship when compared to a long relationship.
Financial contributions of one party will often equal contributions made as the homemaker and/or parent, especially in a longer relationship.
Special factors may be considered as carrying more weight, for example, where the contributions of one party were made more onerous because of family violence.
Certain contributions may be given different weight depending on whether they were gained as a windfall, such as an inheritance or lottery win, or earnt through skill and effort.
Step 3: Assessing the current and future circumstances of you and your former partner
After a percentage assessment is made on the basis of contributions, there may be a further adjustment to the overall percentage division in favour of you or your former partner based on the following:
Your ages, and by extension your years of working life that remain.
Your incomes and income earning capacities.
The assets you will each retain as part of the final property settlement.
The financial resources you will each have as part of final property settlement, for example an interest or income stream as a beneficiary of a trust, or an interest in a deceased estate.
Diagnosed injuries or health issues.
The care of a child or children under the age of 18 years.
Step 4: Determine if the final settlement is just and equitable
This means that when the overall property settlement is viewed as a whole after applying the 3 steps set out above, it must bring about a fair result, or a result that is not manifestly unjust. Each case turns on its own facts, and there is no specific formula to determine a property settlement, which can often lead to varied and sometimes conflicting outcomes.
