Property Settlement Legal Services

Property settlement is the legal process of dividing property, assets, superannuation and debts between you and your former spouse or de facto partner, after the relationship has ended. The process is governed by the Family Law Act 1975 (Cth), which sets out a pathway to make sure the property settlement is ‘just and equitable’. This process is often referred to as ‘the 5-step process’ and is set out in more detail below.

Both married and de facto relationships can follow the same 5-step process to reach an agreement. There are time limits that apply, so it is often best to begin the process as soon as it is practical to do so. You can begin the property settlement process as soon as you have separated, this means that if you are married, you do not need to wait until you are divorced.

• Filing an Application for Consent Orders with the Court (in which the parties jointly ask the Court to make Orders setting out their obligations under the agreement); or
• By entering into a Binding Financial Agreement (“BFA”), which is a special type of contract between the parties.

If you cannot agree with your former partner, then either one of you can apply to the Federal Circuit and Family Court of Australia (“FCFCOA”) for specific Orders about how the property is to be divided. Before applying to the Court, the parties are expected to comply with certain ‘pre-action procedures’ designed to make sure that the parties have made a genuine effort to reach an agreement. Very few cases end up having to be decided by a Judge, as even after applying to the Court, it remains possible (and preferable) to settle out of Court by negotiations or mediation.

If a Judge does have to make the decision, they will consider evidence from you and your former partner and then apply the 5-step process to decide how the property and debts will be divided.

BWJ Law can help you negotiate a fair property settlement with your former partner, and they can also represent you in a mediation or at Court if an agreement cannot be reached. Our aim is to help clients obtain a fair result without unnecessary cost and stress.

• Property (home, business and investment properties)
• Cash and bank accounts
• Inheritances
• Superannuation
• Investments
• Shares
• Jewellery
• All other assets whether jointly owned or not
• All debts whether jointly in joint names or not including mortgages, loans, credit cards and personal debts

Sometimes issues arise if people cannot agree whether their relationship is a de facto relationship or something less significant. Since property settlements are only available to married or de facto couples, a dispute of this nature can mean the difference between a person being entitled to a property settlement or being left only with those assets (and liabilities) held in their name at the time of separation.

The rules governing whether a relationship is a de facto relationship are set out in the Family Law Act 1975 (Cth) and in common law. This area can sometimes be very complicated. If you are unsure whether your relationship is a de facto relationship, then it is important to seek quality legal advice quickly to ensure your rights are protected.

A Consent Order is a legal document that is made with the agreement of all parties involved and is approved by the Court if the agreement is just and equitable. Although you will not need to attend Court to apply for an Application for Consent Orders, the result of the process is fully enforceable Court Orders. Consent Orders are binding on all parties and can be easier to enforce than other agreements such as Financial Agreements. To avoid enforcement action, which may be expensive, it is crucial for parties to make sure they can abide by the requirements of the Consent Order before signing it. We advise examining your options with one of our experienced property settlement lawyers to decide the best line of action because every case is different.

Step 1: The court must ask whether it would be ‘just and equitable’ to make any orders in the circumstances of the case:

The court may decide that it does not need to alter the property interests of the parties and may decide to not make any orders at all, at which point the case will end. If the parties have jointly owned property or, have been in a long relationship where property is held solely in one spouse’s name, then the court will usually decide that it is ‘just and equitable’ to make an order.

Step 2: The Court will then identify all the assets and liabilities of each party:

The Court will create a list of each party’s current assets and liabilities (including superannuation). This list is referred to as the ‘property pool’, ‘balance sheet’ or ‘schedule of assets and liabilities’.

Where an asset has been deliberately or recklessly destroyed or wasted, then the Court may keep it on the list notwithstanding that the asset no longer exists. Such assets are usually described as ‘notional property or ‘addbacks’.

If the Court decides that an asset is not owned by either of the parties, for example, because the asset is owned by a corporation or trust, then the Court may decide not to include it in the property pool list depending on how much control the parties have over the relevant company/trust.

The Court will attribute a value to each of the assets and liabilities in the property pool list, using the evidence before it (usually making reference to an independent valuation). You may not agree with the value that the independent expert or Court gives to an asset. Assets must be included in the property pool list even if they were acquired after separation, nothing that the mere inclusion of an asset, does not mean that the Court has decided that it needs to be divided between the parties.

Step 3: The contributions of each party to the assets

The Court will then assess how each much each party contributed to the ‘acquisition, conservation or improvement of the asset pool’ and the ‘welfare of the family, including as homemaker’. Contributions by one party to the accumulation of assets are often (but not always) offset by the other party’s contribution to the welfare of the family. Once the assessment of contribution is complete, it is expressed as a percentage.

Contributions may be financial or non-financial. A non-financial contribution is commonly applied in situations where one party has cared for the children thereby allowing the other to go to work.

A contribution may also be direct or in-direct. An example of an in-direct contribution may be where one party’s parents have gifted money or property to their child. This may be treated as a contribution on behalf of the party receiving that gift.

Contributions are not always assessed as being equivalent to their dollar value. This is particularly the case during a long relationship where assets brought into the relationship at the start of the relationship are of little relevance to the final distribution. This was once called the ‘principle of erosion’ and is also sometimes referred to as the ‘merger principle’.

Step 4: Examine other relevant factors and adjust accordingly:

In this step, the Court will assess whether further adjustments should be made taking into account a variety of factors (often called the s75(2) factors by lawyers). The list of factors is comprehensive with the most relevant usually being a consideration of each the party’s:

• Age and health;
• Income, property and financial resources (a financial resource could include consideration of a beneficial interest in a family trust which was excluded from the property pool at step 2);
• Physical and mental capacity for appropriate gainful employment;
• Any disparity in the income earning capacities of party (particularly where joint decisions made during the relationship have caused the disparity);
• Any instances of family and/or domestic violence; and
• The need to protect the parental responsibilities of a party.

The Court will use its consideration of these other factors to adjust the percentage reached at the end of step 3. Adjustments between 1% and 10% are often applied. Adjustments of more than 10% are rare, noting that a 10% adjustment from 50/50% to 60/40% results in one party receiving 50% more wealth compared to the other.

Step 5: Further adjustments to ensure the outcome is ‘just and equitable’

The order being made must be deemed ‘just and equitable’ by the Court. The Court may therefore additionally consider other relevant factors, such as the way a person has conducted themselves during the relationship and since separation, for instance, whether they have purposefully or recklessly reduced the available assets for division. The Court’s idea of ‘just and equitable’ may not be the same as the parties, which can sometimes leave people feeling very upset. This is why a negotiated outcome may be a less stressful and more cost-effective method of resolving your dispute.

Exceptions to the 5-step process:

The size of the property pool or duration of a relationship may result in a Court making a decision which cannot be explained solely by following the above pathway. The 5-step process is only a guide and although it is the most common process followed by the Courts, it is not the only pathway used by the Court to make decisions.

BWJ Law are well versed in property settlement matters and will give you accurate and easy-to-understand advice about how the 5-step process applies to your case.

It is important to formalise your agreement either making an Application for Consent Orders or by entering into a Binding Financial Agreement. If you choose not to formalise your agreement, it is important to be aware that this is risky as the other side can still apply to the Court for Property Settlement Orders even after you have reached (and implemented) an informal agreement. Furthermore, there are certain tax exemptions that apply to transfers of property between separated spouses that can only apply if the transfers are pursuant to Court Orders; these exemptions can often save you thousands and are therefore likely to outweigh the cost involved in formalising the agreement.

Consent Orders are usually cheaper and less risky compared to Binding Financial Agreements, but they are also less flexible. Our property settlement lawyers are experienced in preparing Consent Orders as well as Binding Financial Agreements; contact us today to find out more about the difference and decide which is best for you.

The property settlement process can be difficult and stressful, and it is important you protect the property that is rightfully yours. BWJ Law offers various pricing strategies to suit your situation depending on the complexity of the agreement and whether negotiations need to take place. See our Fees page for more information.

We have a client focused approach to our legal services and put your best interests first to ensure the property settlement process is as smooth and stress-free as possible. Speak with our friendly teams to work out which strategy and agreement type suits your needs.