How Does a Court Determine your Property and Financial Settlement after Divorce?

Property and Financial Settlement after Divorce

When you and your partner go your separate ways, it’s rarely an easy task to divide your assets. Splitting assets evenly down the middle may seem like the obvious solution, but there are many factors that should be considered when deciding on a just and equitable property divorce settlement. While some couples will readily agree on how assets should be divided, this is not always the case. In these situations, following on from either attempted mediation and/or other forms of negotiations, a court will decide how assets should be divided.

So how does a court determine your property and financial settlement after divorce? There is no one rule or formula when it comes to the division of assets. Rather, a court is guided by general principles set out in the Family Law Act 1975 and a decision is based on the below considerations.

What is the value of assets?

To begin, all assets, owned by either or both parties, will need to be valued unless the parties agree on those values as at that point in time when either the parties are in agreement or a judge is determining the case. The sum total: This is referred to as the net asset pool and includes assets acquired before and during or after the marriage, although inheritances received towards or after the end of a relationship are usually not included if there are other sufficient assets in the pool to allow for a fair settlement between the parties. Assets may include the family home, cars, investment properties, shares, jewellery, furniture and savings.

A list of all assets should be made with approximate values or formal valuations given to each of the assets. It is important that valuation of assets is accurate and consideration should be given to appreciation and depreciation.

In addition to assets, the court will also consider liabilities. Liabilities may include debt and loans such as a mortgages, or student loans, as well as taxation and credit card debts and stamp duties. All liabilities are considered, whether they are under the names of both parties or an individual, but debts incurred post-separation may need to be carefully analysed further to ensure it would be fair to include them such as where they relate to reasonable living expenses.

What has each party contributed?

The court will then consider what each spouse has contributed to the asset pool, both at the commencement of the relationship (usually signified by the parties’ cohabitation) and what they did during their relationship. It may also be relevant to consider their post-separation contributions in the event something significant has occurred during that time or the period has been a long one. Contributions can be financial and non-financial. Initial contributions are those assets attained before marriage and contributed to the pool.

The categories of contributions include:

  • Financial (e.g., lump sums / assets due to one party, and income that has been applied towards the acquisition or conservation of an asset such as paying off a mortgage)
  • Non-Financial (e.g., personal exertion of a party who renovates a property thereby increasing its value, or when one party gives up their career to help further the party’s career)Homemaking (e.g., cooking, cleaning, washing, ironing, running errands, etc.)
  • Homemaking (e.g., cooking, cleaning, washing, ironing, running errands, etc.)
  • Parenting (e.g., who looked after the children, took them to soccer practise, did their homework with them, etc.)
  • Income
  • Mortgage repayments
  • Care of children
  • Home making
  • Inheritance
  • Bonuses

There is no starting point of 50:50 in Australian Family Law. Each matter is assessed on its own merits, but generally speaking, all things being equal the longer a relationship goes on for (say, 10 years+), the closer and closer the parties’ will get to a contributions assessment of ‘equality or thereabouts’.

What are the ‘future needs’?

Attention is then given to the future needs of each party, if any, that may justify a percentage adjustment to the contributions assessment in the interests of fairness. When considering future needs a court will look to age, health, earning capacity, responsibility for children, duration of the relationship (not just the marriage), new relationships or financial circumstances and any other information factors that are relevant to the particular couple in question.

An assessment of these future needs will then determine how the asset pool is split. For example, the spouse who is responsible for the future care of children may receive an increased percentage of the asset pool as a result.

Is the property settlement just and equitable?

The final step involves a review of the proposed settlement and evaluating whether such a settlement is just and equitable.

The court will look at the practical outcomes of the proposed settlement and how it will affect each spouse. If the proposed settlement leaves one spouse significantly worse off, then they could argue the proposed settlement isn’t just or equitable. If it is decided that the proposed settlement is just and equitable and no further adjustment is required, then orders will be made. It will be upheld and formalised.

The process described above may sound relatively simple, but in reality, different lawyers will have different opinions on what is just and equitable. It is important to obtain advice from the outset that is not based on subjectivity, but objectivity. Choose a lawyer who has intimate knowledge of the law and extensive experience in trying cases in court and therefore has a good idea of what judges do, should that become relevant.

It is worth noting the above process is applicable not just to divorcing couples, but also de facto couples whose relationships have broken down after 1 March 2009.

For more information on how we can help you with your property and financial settlement, arrange an appointment with one of our experienced family lawyers using our online contact form or call 1800 600 664.

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