The steps of property settlement

By Alison Ross / 04 October 2017

Upon separation one of the first questions you may ask yourself is, ‘how much of our property will I be entitled too?’ Your financial security following separation is important. Understanding how the court will approach and decide this question will assist you to prepare for life following separation.

It is important to point out that there is no exact formula to scientifically determine what your exact entitlement will be if the court was deciding your matter. Ultimately the judge has the discretion to make orders which he or she considers is just and equitable and on any particular day a group of family law specialists and judges when given the same facts could arrive at different entitlements, all of which
could be correct. It is for this reason that lawyers will often advise you on your range of entitlement, rather than an exact dollar figure.

However, typically the court will determine your entitlement in a property settlement by using a four step approach, once the threshold of Stanford (2012) 247 CLR 108 is established (that is, after determining that it is just and equitable in the given situation to make a property settlement order).

The four steps

Step 1: Determining the property pool

The court will firstly determine what property that you and your former spouse own. The court will take into account all your assets, liabilities and financial resources owned by each of you solely and jointly. This is called your ‘property pool’. The items in your property pool must be
given a value either by agreement or a valuer. Generally, the court will value the items as at the date of the hearing rather than, for example, the date of separation.

Step 2: Assessment of contributions

The court then determines the contributions which the parties have made to the acquisition, conservation and improvement of the property.

The court will consider:

  1. the contributions each made at the start of the relationship;
  2. the contributions each made during the relationship; and
  3. any contributions made after separation.

Contributions can be direct and indirect, financial and non-financial as well as relating to the welfare of the family unit. The length of your relationship will impact the assessment of contributions. The court has accepted that in midterm to longer range relationships, all other contributions being equal, and where each party has worked equally hard in their respective spheres (whether as breadwinner, homemaker and/or caregiver) that the assessment of contributions will often be 50/50.

However, there are circumstances where the court will determine that the contributions between you and your partner are not equal; for example, where one party made a greater initiation contribution or has received a significant inheritance/gift.

In shorter relationships the court is more likely to determine contributions on an asset by asset approach. The court will also give more weight to the financial contributions of the parties in shorter relationships. 

Step 3: Adjusting factors (section 75(2) factors)

The court then assesses the future differences between you and your partner and may make an adjustment if one party comes out of the relationship in a potentially better position than the other. The court considers the factors set out in section 75(2) of the Family Law Act which includes factors, including:

  1. your income and earning capacity;
  2. property and resources that each party retains;
  3. superannuation entitlements;
  4. deficits in health;
  5. care of a young child; and
  6. payment of child support.

The court will at this stage arrive at an assessment of your entitlement as a percentage of the property pool, adjusted from the assessment of contributions.

Step 4: Just and equitable

The final step is for the court to review its assessment and make any further adjustments it considers necessary to achieve a fair and equitable distribution. The court will then divide the net property of the parties to achieve the property adjustment division.

The contents of this paper are not intended to be a complete statement of the law on any subject and should not be used as a substitute for legal advice in specific fact situations. HopgoodGanim Lawyers cannot accept any liability or responsibility for loss occurring as a result of anyone acting or refraining from acting in reliance on any material contained in this paper.

Alison Ross
Alison is a Partner of our Family and Relationship Law practice who works exclusively with HG Private clients.

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