Property Division and Financial Support after separation

Contributed by Margie Rowe, Anna Theodore, Rosa Grahame and Elinor Knaggs and current to March 2022

What does this section cover?

How the law approaches property division, time limits that apply, special rules for de facto relationships, spouse maintenance.

Time limits

Time limits are different for married and de facto couples:

• For married couples the time limit is 12 months from the date of divorce. If you aren’t divorced no matter how long you’ve been separated, the time limit has not started to run;
• For de facto couples, the time limit is two years from the date of separation. This is the date when your de facto relationship ended.

De facto relationships

The law about property division and financial arrangements is the same for married and de facto couples. However two threshold questions apply to de facto couples:

1. Are the parties in a de facto relationship?
2. Are they entitled to apply for a property settlement or financial support under the Family Law Act?

There is no distinction between same sex and opposite sex de facto relationships.

1. Are the parties in a de facto relationship?

A de facto relationship can exist where the parties are not married or related, and where they have a relationship as a couple living together on a genuine domestic basis. If a Court is asked to rule on whether a de facto relationship exists, they may look at any of the following factors:

• The length of the relationship;
• Whether the parties lived together and if so for how long;
• The extent to which they mixed their finances and financially supported each other;
• The way they owned and used property;
• Whether they had a mutual commitment to a shared life;
• Whether the relationship was registered. In the ACT de facto relationships can be registered as a civil union under the Civil Unions Act 2012;
  
• The care and support of any children;
• How the parties presented their relationship publicly.

A party can be married to one person, and been found to be in a de facto relationship with another person at the same time.

2. Are they entitled to apply for a property settlement or financial support under the Family Law Act?

There are a number of requirements that de facto couples have to meet.

A geographical requirement

The geographical requirement is met if:

• The parties usually lived in a ‘participating jurisdiction’ when the relationship ended. All states and territories except WA are a ‘participating jurisdiction’;
• The parties lived elsewhere when the relationship ended, but usually lived in a participating jurisdiction for at least a third of the relationship;
• The applicant for property orders made substantial contributions to the property and finances in a participating jurisdiction.

A separation date

The parties must have separated after 1 March 2009. If they separated before this, they can still opt in to the Family Law Act 1975.

Relationship factors

The parties must have either:

• Been in a de facto relationship for at least two years; or
• Had a child together; or
• Registered their relationship; or
• Made substantial contributions to the property.

How do you work out how your property should be divided?

There is no rule about this. However, both the Family Law Act 1975 and Court decisions give a guide to how property division is to be approached. This is often referred to as the ‘4 stage approach’ although there are really five steps to go through.

Stage 1: What is the property to be divided and what is its value?

The first step is to identify all the property owned by you and your partner, either jointly or in your sole names. Debts and liabilities, both in joint names and in sole names, also need to be listed. This only relates to assets and liabilities that exist at the date you are working this out. For example, if you recently sold a house then this is not included in the list of property, although any money you made from the sale is included.

This is more complicated if you have companies or trusts that own property and you will need legal advice if that is the case.

Superannuation of each party is regarded as property but it is usually put in a separate ‘pool’.

You need to put a value on the property – initially this may be an estimate but it is often important to check that you have got the correct value. This is especially the case with superannuation, where you will often need to get the Superannuation Fund to conduct a valuation. You should seek legal advice about this.

You should aim to have a list that covers:

• All the property – in sole and joint names and the value of each asset;
• All the debts and liabilities – in sole and joint names – and the amount of each debt and liability;
• The value of all superannuation interests.

Is it just and equitable for the court to make any property division?

If your property division is being considered by the Federal Circuit and Family Court of Australia (FCFC), the Court must consider whether it is fair to make any orders dividing the property at all. In most relationships at least some of the property is owned jointly, and this means that some division of the property has to occur after separation. Similarly, if you have been in a long relationship but all the property is in the name of only one party, it would usually be fair and necessary to make an adjustment to this arrangement.

An example of where the court might find it is not just and equitable to make any property division orders is where the relationship has been a short one, say two years, the parties have deliberately kept their property and finances separate and both have similar future financial needs and resources.

Stage 2: Contributions to getting, maintaining and improving property and assets

A number of different types of contributions are relevant. These are:

Financial contributions – made directly or indirectly in acquiring, conserving or improving property – including property that the parties no longer own. For example, bringing property or assets into the relationship at the beginning, using income from a job to pay the mortgage, using an inheritance to renovate a house, using income to contribute to superannuation.

Non-financial contributions - made directly or indirectly in acquiring, conserving or improving property. For example, re-painting a house or establishing a garden which improves the value of the house, nursing an ill spouse so that paid nursing was not necessary, contributing to a business by doing the books, having a grandmother care for the children to save on childcare costs.

Contributions to the welfare of the family as homemaker and parent – for example, running the household, cooking and cleaning, caring for children.

While it is possible to come to an estimate of financial contributions the parties have made, it is much harder to put a dollar value on non-financial contributions and contributions to the welfare of the family. The Court does not approach this as a mathematical exercise.

The Court would assess the relative contributions of each party over the period of the relationship, from the date the parties first started living together up until the date of the court hearing. This means contributions after separation are also taken into account, for example, continuing to contribute to mortgage and bills payments even if you are not living in the house anymore.

Usually the contributions of each party are expressed in percentages, for example, the Court might find that one party has contributed 60% and the other party 40%.

If you are working out a likely property division yourself, you would also try to come to an assessment of the relative contributions you and the other party have made, in percentages.

However property division assessment does not end with contributions but must take into account the next step. An assessment of the contributions each party has made, sometimes over a long relationship, is very much a ‘backward looking’ exercise – looking at what has happened in the past. The next step is the reverse and is ‘forward looking’.

Stage 3: Future financial needs and resources

This stage is a consideration of how each party is going to be impacted by the financial breakdown of the relationship in the future and what resources each might have to call on. The factual circumstances that are usually most relevant are:

• Whether one or both of the parties will have the care of children of the relationship;
• Differences in income and/or earning capacity between the parties;
• The age and health of the parties;
• The capacity of each party for employment;
• Access to superannuation or other financial resources such as pensions and the value of these;
• Commitments of either party to support others, for example, children of a first marriage;
• The payment of child support;
• The effect of any order on earning capacity of either party.

If any of these factors are relevant, the percentage division in Stage 2 would need to be adjusted. This is best explained by an example.

Example

The parties were married for 15 years. They have two children aged 5 and 7. Since the birth of the children, their mother has had a year off work on maternity leave with each child and has returned to her job part time after this. The mother is responsible for school pick up and drop off and is the primary homemaker and parent. The father has worked full time continuously and been promoted three times since the children have been born. He now earns substantially more than the mother and has accumulated more superannuation. The parties’ contributions to their property have been equal. They are now separating and need to divide their property. The children will live primarily with the mother during the week but with the father on weekends. He will pay child support.

Contributions are equal so at stage 2 the property would be divided 50% to the mother and 50% to the father.

However, the mother now earns considerably less than the father in her part time role. While she is likely to resume full time work when the children are older, she will still be earning substantially less than the father as she has not been able to apply for promotions in her part time role. This means that her contributions to her superannuation fund will be less than the father’s and as a result his superannuation fund will grow at a faster rate than hers.

In stage 3 an adjustment of 10% would be made in the mother’s favour in relation to the property, including the superannuation that is to be divided.

This would mean that the mother would receive 60% of the property. The father would receive 40% of the property.

Stage 4: Is the property division just and equitable – is it fair?

At this stage in the property process the Court would look at the actual impact of the proposed division. So in the example above, the percentages would be applied to the actual property and superannuation to determine what each party would receive in dollar amounts. This step requires the Court to stand back and assess whether the division overall is fair.

If it is not fair, a further adjustment can be made at this stage. In the above example, the mother receives 60% of the property based on stage 2 and stage 3. In dollar terms, this could mean that she is unable to buy the father’s interest in the former home as her borrowing limit based on her salary leaves her with a shortfall of $20,000. This may be a factor in the Court making an adjustment at this stage and for example increasing the mother’s share to 63% - a relatively small increase but one which enables her and the children to continue living in the home.

Financial support – Spouse maintenance

Spouse maintenance is a payment made by one former partner to the other after separation.

There are two threshold questions that must be satisfied before spouse maintenance will be ordered by the Courts:

• Does the payer have the capacity to pay spouse maintenance? The payer must have surplus income after reasonable expenses are deducted, including any amount paid as child support;
• Does the payee have a need for spouse maintenance? The payee must have reasonable expenses that exceed their income and no or limited capacity to increase their income.

The Courts look at the same list of factors in determining whether spouse maintenance should be paid as they do in Stage 3 of property settlement.

Spouse maintenance is sometimes required quickly after a relationship breaks up, where one party has been financially dependent on the other party. Urgent applications for spouse maintenance can be made to the Court.

Examples of cases where spouse maintenance is likely to be ordered:

• The parties separated after 25 years of marriage. Their children are adults. The wife did not work in paid employment during the marriage but was the homemaker and parent. The husband worked full time and is now a senior public servant. The wife’s prospects of obtaining paid work are low given her age, lack of qualifications and lack of workforce participation;
• The parties separated after ten years of marriage. The wife is a middle manager in the Public Service. The husband was a firefighter but sustained a work injury that means he can’t do physical work. He was in the first six months of re-training by doing a university degree in Information Technology. The parties have two young children and share the care of the children. The wife pays child support to the husband. As the wife is likely to have surplus income and the husband has little income, she would likely have to pay spouse maintenance until the husband has finished his studies and can earn an income again.

For more information on spousal maintenance see: https://www.fcfcoa.gov.au/fl/fp/spousal-maintenance.

Property - Frequently asked Questions:

When can I apply for Property Division Orders?

You can apply to the Court for property division orders until one year after a divorce, or two years after a de facto relationship ends.

You can come to a private agreement about property division at any time. However these arrangements will not be enforceable unless formalised, for example in a Binding Financial Agreement or Consent Orders. You can apply to the FCFC for formal court Orders, including Consent Orders up until one year after divorce, or two years after a de facto separation. In some special circumstances, you can apply to have your matter heard outside these time limits.

For Court Orders, you only need to have applied within the relevant time period. These orders do not need to have been finalised by the end of the relevant time period.

More information about Financial and Property Orders can be found here: https://www.fcfcoa.gov.au/fl/fp/overview.

Do I have to go to the Federal Circuit and Family Court (FCFC)?

No, you and the other party can come to an agreement without going to court. This agreement may not be enforceable unless you formalise it.

You may come to an agreement about property division and financial arrangements, either at separation or after attending Family Dispute Resolution.

This agreement can be formalised by:

• A Binding Financial Agreement; or
• Consent Orders.

Formalising it in this way will make it binding and enforceable.

If you do not formalise your agreement, the other party can still apply to the FCFC for Property and Financial Orders within one year of divorce and within two years of a de facto separation

More information about making property and financial arrangements can be found here: https://www.legalaidact.org.au/sites/default/files/files/publications/Property_settlement_after_separation.pdf.

What if I did not work or make financial contributions during the relationship?

The Court takes into account non-financial contributions, including contributions made to the family as a parent or homemaker.

The Court will consider all contributions made during the relationship, whether that is assets, money, or non- financial contributions such as care of children, being a homemaker, looking after property, renovations and gifts. The Courts will also consider the future needs and resources of both parties.

More information about financial and non-financial contributions can be found here: https://www.fcfcoa.gov.au/fl/fp/overview.

Does the property have to be split 50/50?

No.

There is no rule about how property should be divided on separation, and no presumption that 50/50 is a starting point. The law considers contributions made to the property, as well as future needs and resources of each party in determining how the property is to be divided.

Do I lose my rights to the property if I move out of the family home?

No.

Your rights to include the home in the property division remain the same as if you hadn’t moved out. However, if you do not contribute to mortgage and other home related payments after you move out, this may be taken into account in the property settlement. However, if you rent in your alternative housing, this will also be taken into account.

Can I prevent the other party from selling the house?

It may be possible to stop the other party selling the house.

You can do this by lodging a caveat on the title of the property in the ACT Supreme Court or you can apply to the FCFC for an injunction which legally restrains the other party from selling the house. These are usually temporary restraints to give you time to agree on a property division, or have a Court hearing and the Court make Property Division Orders.