How is property divided in family law?

 In divorce, Property settlement, Separation

Unfortunately there is no set mathematical formula I can give you to tell you how property is divided in family law or what the outcome will be.  Wouldn’t it be nice if that were the case…. Instead In Australia, the Family Court uses what is known as the 4 step process for determining how property will be divided when doing a property settlement.  This process allows for the courts to look at the full set of circumstances and make a decision based on all factors as to what they believe is the fairest decision for all.  

So what are the 4 steps?

Step 1: Identify & value the assets, liabilities, and financial resources.

Whilst this sounds like the easiest part of the process – it often is the most difficult.  Why?  Because first of all people will argue over what the assets and liabilities are and then the argument will move to what they are valued at.  So let’s try and settle some of these issues quickly.  

First off – everything is included in the asset and liability pool.  You don’t get to pick and choose – everything is in.  I have a great asset and liability checklist that you can download for free here to help get you started. 

Secondly if you can’t agree on the value – get it valued!  

Step 2:  Assess the contributions made by each party before and during the relationship and post the separation. 

Contributions include both direct and indirect financial and non financial contributions.  I know this sounds a tad confusing but the best way to think of contributions is to look at everything you both provided and gave to the relationship as a whole.  For example, one of you may have been responsible for the payment of the mortgage with the other responsible for the payment of bills.  One may have worked  more and the other stayed home to care for the children.  One may have done more work towards renovations or maintenance whereas one may have cared for the household more.  

What is important to note here is that you need to consider all of the contributions made.  It isn’t a mathematical formula of who brought in the most money or who paid the most in bills.  At the end of the day, the law recognises that during your relationship you both made financial decisions for the better of the relationship and those decisions should not now be used to the detriment of one party. 

Step 3: Consider the future needs of each party.

This steps requires you to consider things such as the:

  • Age of each party; 
  • Health of each party;
  • Income, property, and financial resources of each party;
  • Earning capacity of each party;
  • Care requirements for any children under 18;
  • Commitments to support others;
  • Standard of living that in all the circumstances in reasonable;
  • Duration of marriage / relationship;
  • Care of dependents other than child;

This list is not an exhaustive list of what the Court must consider. If you would like to see the full list this is set out in the Family Law Act at section 75(2) for married couples or section 90SF(3) for de facto couples.

Step 4: Divide the property/assets in a way that is “just and equitable”. 

Lastly the Court has to make a decision to divide the property pool in a way that is “just and equitable” or fair.  

As each settlement is determined based on the interests and circumstances of that relationship, the outcome can and may be different to what other’s have received in the past. There is no cookie cutter approach to undertaking a property settlement and that is because no two (2) relationships are ever the same.  

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