3.3 Couples who are not married

10 Aug 2016 - 16:01 | Version 10 |

Contributed by SallyBolton, MauriceSgarbossa and JaquiePalavra and current to 1 May 2016

People in de facto relationships (be they heterosexual or same sex couples) now have very similar rights when it comes to family law property as couples who have been married. Parenting disputes are treated the same way when parents have been married, were in a de facto relationship and even if the parents never lived together or never really had an ongoing relationship.

Property division for people who have been in a de facto relationship and who separated on or after 1 March 2009 is now dealt with by the Family Law Act (FLA). Historically, it was dealt with by State/Territory based legislation. In the Northern Territory, the De Facto Relationships Act 1991 (NT) (DFRA) applied to couples who separated between 1 October 1991 and 28 February 2009, unless they opted into the newer provisions under the FLA .

A range of other legislation also affects the rights of people in or who have been in a de facto relationship in relation to other possible entitlements in the event of accident, illness or death of a partner.

What is a de facto relationship?

De facto is the term used to describe the relationship between two persons who live together in a marriage-like relationship but are not married. It does not matter whether the two people are in a same-sex relationship or a heterosexual relationship.

The mere fact that a couple live together in the same house does not prove the existence of a de facto relationship. For example, a woman and her elderly male relative who jointly purchase a house for the sole purpose of sharing living expenses and building up an asset are not de facto.

Unless their de facto status is in doubt, a de facto couple does not need a court order proving the existence of their relationship to exercise their rights under the law. Under section 4AA(2) FLA if the status of the relationship is in doubt, the court looks at the following factors to decide whether the relationship was a de facto relationship or not:
  • the duration of the relationship
  • the nature and extent of common residence
  • whether or not a sexual relationship exists
  • the degree of financial dependence or interdependence, and any arrangements for financial support, between them
  • the ownership, use and acquisition of property
  • the degree of mutual commitment to a shared life
  • the care and support of children
  • whether the parties presented themselves as a couple in social settings.
The court is not to have regard to any of the following matters:
  • whether the persons are different sexes or the same sex
  • if either of the persons is married to another person
  • if either of the persons is in another de facto relationship.
It is possible for someone to be in a de facto relationship with someone at the same time as being married or in a de facto relationship to another person. It is also possible for the court to declare that a couple were in a de facto relationship even if they did not live together, if other criteria are met. The law recognises that de facto relationships, like marriages, often include periods of disharmony, separation and reconciliation. So when determining the status of the relationship, a court considers all the circumstances of a relationship as a whole, instead of applying a list of factors in a mechanical way.

A declaration from the court proves that a de facto relationship existed. This can affect a partner's rights to their partner's superannuation or inheritance if one partner dies, or a person's access to compensation if their partner is injured in a car accident or at work.

Property

Like a married couple, a separating de facto couple can settle their property issues either by:
  • A Binding Financial Agreement or an Application for Consent Orders if agreement has been reached; or
  • going to mediation or court if agreement cannot be reached.

Property settlement by agreement

A separating couple who make a property division by agreement decides for themselves what happens with their property, rather than paying other people to decide for them. The agreement can be made legal and formal by doing a Binding Financial Agreement or an Application to the court for "Consent Orders".

To do a Binding Financial Agreement both parties must have independent legal advice from separate lawyers. The lawyers have to sign the agreement to confirm they've given thorough advice for the Agreement to be valid. Parties can also do a written application to the court, for Consent Orders. It is important for both parties to provide disclosure about their financial positions so each party can make an informed decision, even if there are no court proceedings on foot.

If separating couples can't decide what to do with their property, each party should seek legal advice to get an idea of what a court would determine each party would be entitled to. The parties should then try further negotiation or mediation. If that fails the parties should obtain further legal advice about whether the matter should proceed to court.

A step-by-step guide to property settlement

Step 1 - List the property and decide on values

  • Make a complete list of all assets, such as cars, boats, real estate, chattels, shares and financial resources (including superannuation). It does not matter whose name a piece of property is in or whether one party believes it should be included or excluded. Note down who brought what items of property into the relationship and when.
  • List all debts. It does not matter whose name a debt is in or whether one party believes it should be included or excluded.
  • Obtain bank and finance company records. Obtain tax and business records to show what each party's income was during the relationship.
  • Try to agree on the value of each of the assets and the amount owing on each debt. Assets should be valued at their current resale value, not what they cost to purchase, or how much they are insured for. Valuers reports or real estate market appraisals are helpful. Assets do not need to be formally valued if both parties can agree on the value. If no agreement is reached, legal advice should be sought.
  • Determine the amount of superannuation payable on the date of separation and details of the likely benefits in the future, such as a lump sum payment on retirement or a combination of lump sum on retirement, and a pension. If a party has defined benefit superannuation parties should get legal advice, as the likely value is very different and likely to be much higher than the figure on six monthly member statements.
  • Once the matters in step 2 (below) are agreed upon, each party should obtain separate legal advice about what each party is entitled to claim. To be able to provide accurate advice, a lawyer needs the list of assets and debts and their values. Sometimes it is difficult to predict how a court would divide property. If the case is a complex one, both parties should seek legal advice about the range of possible decisions the court may make. This advice may help parties work out a settlement with which both are comfortable. Legal aid is able to assist some people in property matters dependent upon various factors including their income and the amount of property owned by them. Even if a person is not eligible for legal aid they are still entitled to a free initial advice session where they can receive basic legal advice on their matter.
  • The parties should reach agreement about how the property should be divided. A separating couple who is having difficulty communicating can discuss matters through a mediation service or with the assistance of lawyers. If parties are able to agree on the division of property, significant amounts of time and money (court and legal fees) will be saved. Both parties should be as flexible as possible when making an agreement. However, it is often best that an agreement is reached as soon as possible to end any financial relationship between the parties. The vast majority of property settlements are achieved without going to court. It is important to be prepared to work at an agreement and to consider the other party's needs and point of view.
  • Once agreement is reached, and depending on the amount of property to be divided, the agreement should be made legally binding and final. This is particularly important in cases involving real estate. Again, legal aid may be available to one or both of the parties, particularly if children are involved. Otherwise the person will have to hire a lawyer. The lawyer for the other party then checks that the agreement covers all relevant issues. A property settlement is final, so any separation agreement should be checked thoroughly. To obtain an exemption from the stamp duty payable when legal ownership of property is transferred from one party to the other, the Commissioner of Taxes has to be satisfied that the transfer is being made because of the breakdown of the relationship. Evidence of this can only be provided in the form of a court order or a separation agreement. Once the separation agreement is signed the transfer document can then be presented to the Commissioner of Taxes, together with a copy of the separation agreement (see *Contact points* ).

Step 2 - List the contributions each person made

  • List who did what during the relationship, including who did paid work and what their income was, who maintained the home, who cooked, cleaned and shopped, who cared for the children and who did work on the property, including renovations and maintenance of the home and garden. Financial and non-financial contributions are equally valued and recognised, whether they directly or indirectly affected the value of what property each party now has. The contribution each person made since separation is also relevant.

Step 3 - List the future needs and earning capacities of both parties

  • Look to the future and try to estimate what each person is going to need and how much they can earn.

Step 4 - Try to agree on what is fair and equitable.

  • It is important to take into consideration the effect of any proposal on each person's ability to move forward.

It is important to formalise an agreement through an Application for Consent Orders or a Binding Financial Agreement. There may be a stamp duty exemption applied to the transfer of property if the parties have court orders (whether made by consent or not) or are dividing property under a Binding Financial Agreement after separation.

Property settlement through the courts

Like married couples, separating de facto couples can apply to the Family Law Courts for a property settlement. De facto couples have property rights that mirror those of married couples (see Couples who are married) [ss90RA- 90ST FLA]:

Who can apply?

A de facto spouse is eligible for a property settlement (an adjustment of property interests) if all of the following apply:
  • the parties have been in a de facto relationship for 2 years or more
  • the parties have not been in a relationship for 2 years, but have a child together;
  • the parties have not been in a relationship for 2 years, but one party has made significant contributions and it would be unfair not to let that person have a property settlement.
Property settlement can include one party paying the other maintenance, in addition to any child support that may be payable (see Financial Support for an Ex- De facto partner).

What assets are considered in a property settlement?

Property includes:
  • assets and debts
  • any estate or interest (whether present, future or contingent) in real or personal property
  • cash
  • superannuation.
Property includes property both people had at the start of the relationship and any gifts or inheritances obtained by either party.

Usually, the value of property is taken to be its market value as of the date of the court hearing, not the date when the parties separated. When the couple cannot agree on the value of a piece of property, the court makes its own assessment. All property is taken into account by the court, irrespective of whether it is in one person's name or in both names.

Not only property is considered in a property settlement. A de facto partner may have access to a range of financial resources that don't fall strictly within the legal definition of property. For example, a partner may make a contribution by investing money or work into a company controlled by the other or may work and support the family, leaving the other partner free to divert more money into a company or superannuation scheme.

Financial resources include:
  • a company or discretionary trust controlled by a de facto partner
  • an income stream from a business
  • any other valuable benefit.

Who can stay in the home?

When a couple separate sometimes there is a dispute about who should leave the parties' house that may be owned by one or both of them, or rented. It is possible to get an order requiring one person to leave the house if it is intolerable or unreasonable for the parties to continue to live together. This is known as an "exclusive occupation order". The exclusive occupation order determines who can live in the house and who, if anyone, must leave. The responsibility for the rent or mortgage depends on who is on the lease or mortgage, unless the court makes specific orders about who should pay these costs.

When deciding whether to make an exclusive occupation order the court will consider various factors, including whose name appears on the title or lease, each person's contribution to the home, the effect on any children of the relationship and the ability of each party to obtain other accommodation.

Time limits

An application for a property settlement must be made within two years of the end of the relationship. The court can extend this time limit in certain circumstances if, by not granting an extension, more hardship would be caused to the person applying for the extension than to the person opposing the extension .

How the court decides

The court will make a just and equitable adjustment of the interests of the parties after considering the following:
  • the financial and non-financial contributions made directly or indirectly by or on behalf of the parties to the acquisition, conservation or improvement of any of the property or to the financial resources of the parties or either of them
  • the contributions (including any made in the capacity of homemaker or parent) made by either of the parties to the welfare of the other partner, their children or any child or other dependant person who has been accepted by the parties or either of them into their household
  • the future needs and earning capacities of both parties (historically this was not a factor taken into consideration).

The Clean Break Principle

The court will try to divide up assets and debts so each person can walk away with a clean break [s90ST FLA].

A court can adjourn property proceedings if either party is soon to experience a significant change in their financial circumstances and waiting would result in a fairer division of assets. For example, where one partner is due to receive superannuation entitlements, the court may decide to postpone its decision until after that person's retirement.

Appeals

If either party is dissatisfied with the court's decision, they can appeal the decision to a higher court if a error of law has been made. Tight time limits apply and legal advice should be sought before any decision to appeal is made.

Enforcing an order

If an order has been breached, a person should seek legal advice. Orders for maintenance of a party should be registered with the Department of Human Services (Child Support). They can enforce an order for maintenance like they can enforce child support obligations. This is often faster and cheaper than pursuing enforcement through the court.

Definition of ownership

The owner of property is the person who holds legal title to it, that is, in whose name the property is registered. The name of the owner of a house or land is printed on the certificate of title or, in the case of a car, on the contract of sale and registration papers. Legal title to other items, such as household goods, is usually nominally given to the person who purchased the items.

Joint property

Where a property in dispute is registered in joint names, both partners share the legal title to it. Where a house or land is jointly owned, either party can apply for an order that the property be sold, so that each can be paid a share from the net proceeds. Such an order can even be made if one partner opposes the sale.

Property in one person's name

Where the legal title to land is in one partner's name, the other has no legal right to a share in it, irrespective of any contribution they may have made, unless they can obtain a court order adjusting the interests in the property. To prevent the owner of the property from selling it or mortgaging it prior to the matter proceeding to court, it is advisable that the non-legal owner lodge a caveat over the property (see Property ).

Financial support for an ex-de facto partner

If one party has the capacity to financially help the other and the other party cannot financially support themselves adequately, the court can order that one party pay the other maintenance, on top of any child support that might be payable.

A de facto spouse who lost job skills and opportunities because they spent several years as a homemaker may be granted an order for the financial support to complete a retraining course or to assist them to continue to care for young children.

Types of maintenance

A court can order:
  • Urgent maintenance
  • Interim maintenance
  • Final maintenance.
Urgent maintenance can be ordered without detailed consideration about what is the most appropriate figure if someone has an urgent need, the other appears to have the capacity to pay and it is not possible to determine in any detail what sum should be paid. Typically this arises when one person made an application for urgent spousal maintenance and the other person has not yet had the opportunity to prepare and file their responding material setting out their financial circumstances. If the court makes an order for urgent maintenance, the court will set a later date for the court to more carefully consider what amount of maintenance is appropriate going forward. This is called 'interim maintenance'. Interim maintenance is paid while court proceedings are on foot, until further order. At a final hearing (or with the consent of both parties) the court can make final orders for maintenance. Once final orders are made the court proceedings finish.

A court can order maintenance to be paid as:
  • a lump sum
  • periodic payments.
The option the court will choose depends on what the parties can afford to pay, and whether they are likely to continue to pay a periodic payment into the future.

When a partner starts a new relationship

Maintenance orders don't automatically end if the partner receiving maintenance enters into a new de facto relationship. The maintenance order continues, but the partner paying maintenance can apply to the court to have the order discharged, suspended or varied.

Enforcing a maintenance order

If a person is having difficulty enforcing a maintenance order, they should seek legal advice and approach the court in which the order was made. If a party is found to have breached a court order, various penalties apply.

Ending a maintenance order

An order for urgent or interim maintenance ends when the court makes another order changing or ending that obligation to pay. When a final order to pay maintenance ends depends on the wording of the order. There can be a trigger event, or a particular period of time specified.

Financial support for children

Financial support for children is available under the Child Support (Assessment) Act 1989 regardless of whether the children were born as a result of a marriage, a de facto relationship, or whether the parents never lived together (see Child support ).The Child Support (Amendment) Act 1989 covers the vast majority of children. The FLA provides for maintenance of children only who are not covered by the Child Support (Amendment) Act 1989.

When a de facto partner dies

Where a person in a de facto relationship dies, the rights of their de facto spouse are, broadly speaking, very similar to those of a widow or widower who was legally married.

A person cannot start court proceedings for a property settlement after their ex-partner has died. However, if family law property proceedings are already on foot and one person dies, the property proceedings can be continued against the deceased person's estate.

For a comprehensive outline of the rights of de facto partners to deceased estates see Wills.

Superannuation

Superannuation benefits are provided for under Federal, State and Territory Acts (see Superannuation ), as well as under thousands of private superannuation schemes run by insurance companies. The entitlements vary according to the terms of particular policies.

Other issues

Domestic violence

A person in a de facto relationship has the same rights of protection from domestic violence as a married person. A de facto partner can take out a domestic violence order (see Domestic and family violence ).

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