Four Steps to identify what you’re entitled to in a Family Law property division

The Four-Step Process

When deciding what percentage of the available assets each party is entitled to, the Court adopts a four-step process. Your Family Lawyer will provide you with advice in relation to your entitlements using the same process as follows:

Step 1: What is the property pool available for division?

The Property Division process starts by working out what each spouse owns. This includes items like cars, bank accounts and real estate and also businesses and trusts. All the property to which the couple is entitled to is in the property pool for division between them. The property may be owned by a spouse individually, jointly with the other spouse or jointly with other people.

The types of assets and debts that are usually in the property pool are:

• Assets:  House, Cars, Bank Accounts, Furniture and Furnishings, Jewellery, Shares (in a publicly listed company such as Telstra, or in private company such as the trading company of the family business), Family Trust (this may be where the Family Trust owns the family business).
• Superannuation is also included in the property pool available for division.
• Debts: Home loan, credit card, personal loan, consumer credit.

How to find out about your ex-partner’s property

Parties have a duty to the Court and to each other to make full and continuing disclosure of their financial circumstances that are relevant to an issue in dispute. If you and your ex-partner reach an agreement, or the Court makes Orders, where full financial disclosure has not been made, there is a risk of a penalty for the non-disclosing person or that the agreement or Orders will be set aside by the Court. In addition, a Family Lawyer cannot assist a client to hide assets or to continue to act for a client where they know the client is not making full disclosure.

Even where a person does not provide full financial disclosure, any transfers of money or property can generally be traced by obtaining the relevant documents under Subpoena. Where assets have been transferred to other people to defeat a Family Law property claim, the law provides that these assets can be “clawed back” into the property pool available for division.

The exception to this is cash: dealings in cash are difficult to trace and therefore difficult to claw back. If you are aware that your ex-partner has dealt with cash, photographic evidence of large amounts of cash, such as cash that they have stored in a box in the home, can assist you to prove this later.

Valuing the assets

For the purposes of a Property Division, assets are valued at the current market value at the date of the division. Therefore, the value of the assets must be at the current market value at the time they are being valued, not their value at separation or some other date.

Where each party wishes to retain certain assets from the property pool, it stands to reason that they want to keep the valuation of that asset as low as possible – the lower the value of the assets they are keeping, the more they will get of the remaining property pool to make up the percentage they are entitled to.

Where significant assets, such as real estate or business interests, are part of the property pool, there can be a difference in the respective positions of each party of hundreds of thousands of dollars.

When parties do not agree on the value of an asset, an indication of value (such as a real estate market appraisal, a Red Book valuation, or a receipt (for smaller items such as furniture or jewellery), will often resolve the dispute.

If the dispute continues, an expert valuation report may help to settle the dispute, but not always. Occasionally, each party will have expert valuation reports that give differing values. Therefore, before ordering a valuation report, the parties should agree on the valuer to be appointed, pay equally for the report and agree to be bound by the value provided in their valuation so as not to waste money on valuation reports which are disputed by the other party.

Even where the parties have obtained a joint valuation report, disputes about value can continue on the basis that the valuation report was not properly prepared. Sometimes, a valuation dispute will not be resolved until a final Court hearing where a Judge will make a decision, based on the evidence, of the current market value of the asset.

Step 2: What contributions has each person made to the property pool?

Work out what each person has contributed to the acquisition, conservation and improvement of the property pool. Contributions are relevant in relation to all property the parties have owned at cohabitation, during the relationship and since separation, including assets that are no longer owned. Contributions must be one (1) or more of the following types of contributions:

Direct financial contributions:

A direct financial contribution is a payment made by a spouse directly towards the purchase, conservation and/or improvement of an asset.

Examples: 

• The equity owned in a house at the start of the relationship.
• Using one’s own income to make mortgage repayments.
• Using an inheritance to pay off the home loan, as savings or to purchase other assets.

Indirect financial contributions

An indirect financial contribution is a payment made towards expenses so that the other party’s income can be instead applied to a direct financial contribution.

Examples: 

• A spouse paying living expenses with their wage so that the other spouse can use their wage to make mortgage repayments.
• A spouse paying for a holiday while the other spouse accumulates their income as savings in a bank account.
• A parent of a spouse allowing the couple to live in their home rent-free so that the couple can use their income to make mortgage repayments on their own property.

Direct non-financial contribution

A direct non-financial contribution is work done by one (1) of the parties to maintain or improve an asset without making a payment towards it.

Examples: 

• Doing renovation works to a property.
• Looking after the maintenance of a home’s exterior.
• Maintaining and operating a stock trading account.

Indirect non-financial contribution

An indirect non-financial contribution is work done by one (1) of the parties that is not done directly to an asset and is not of a financial nature, but that still contributes to the acquisition, conservation or improvement of an asset.

Examples: 

• Caring for children to enable the other party to attend work to earn an income.
• Caring for children so that the other party can do renovations or repairs and maintenance to the home.
• Doing the housework to support the other party to attend work and earn an income.

Contributions to the welfare of the family

Contributions to the welfare of the family are not required to be towards the “acquisition, conservation or improvement” of the property pool, as are the previous categories of contributions. Contributions to the welfare of the family are considered valuable on their own merits and are given weight accordingly. Therefore, the work that one (1) party does as homemaker and parent may have the effect of offsetting significant direct financial contributions of the other party. Therefore, a breadwinner on a high income and a stay-at-home parent of three (3) children may be considered to have made equal contributions to the property pool despite the differences in their roles.

Legal principles that have developed in relation to contributions

Over many years of the Courts considering, weighing and assessing the contributions of parties to a former relationship, several principles have developed in relation to particular circumstances:

• The longer the relationship, the more likely that the contributions of the parties will be assessed as equal, unless there has been a considerable lump sum contributions (such as an inheritance) made by one (1) party.
• The shorter the relationship, the more likely that the contributions of the parties will be assessed in the same proportions as at the commencement of the relationship.
• There is no extra loading for contributions for special skills, such as the contribution of significant funds during the relationship by virtue of one (1) party being a highly successful property developer, surgeon, etc. Extra weight is not given to a party’s contributions simply because their salary is higher than the other party.
• There is no extra loading for “Super Mum” contributions, where a parent (usually the female partner) works full time and completes most of the parenting and household duties on daily basis over many years, while the other parent works full time but does not bear the same load of parenting and household duties.
• Contributions are not approached as a mathematical calculation. Instead, the myriad of contributions of each party are weighed, with real weight given to the role of homemaker and parent. So where one (1) party is the breadwinner and the other the homemaker, the contributions made in their daily lives are considered equivalent (despite the fact that the breadwinner may earn more than it would cost to pay for the household work).
• There is rarely a deduction for “negative contributions”. Losses incurred in the course of the relationship are to be shared between the parties (although not necessarily equally) unless there has been a course of conduct designed to minimise the value of assets or when one (1) of the parties has acted recklessly, negligently or wantonly with the assets so as to minimise their value (eg. intentionally running down the value of a business or financial losses incurred as a result of gambling).
• Windfalls made in the course of a relationship are shared in the proportions of all the other contributions made by the parties during the relationship. The windfall is not necessary the contribution of the party who took the action that resulted in the windfall (eg. buying a lottery ticket).

Step 3: Which person has the greater future needs?

The next step is to consider the circumstances of each of the parties to ascertain whether they have greater responsibilities, disabilities or disadvantages than the other party that mean that they should get the division of property adjusted in their favour.

The factors that the Court will take into consideration in determining whether there should be an adjustment of the contributions-based division of the property pool include:

• The age and state of health of each of the parties,
• The income, property and financial resources of each of the parties and the physical and mental capacity of each of them for gainful employment,
• Whether either party has the care or control of a child under 18 years,
• Commitments of the parties that are necessary for them to maintain himself or herself, or a child or another person the party has a duty to maintain (eg. financial support of an elderly parent),
• The responsibilities of either party to support another person,
• The eligibility of either party to a Centrelink or superannuation pension and the rate of the pension,
• A standard of living that in all the circumstances is reasonable,
• The need to protect a party who wishes to continue that party’s role as a parent,
• If either party is cohabiting with another person – the financial circumstances relating to the cohabitation,
• The extent to which the party whose maintenance is under consideration has contributed to the income, earning capacity, property and financial resources of the other party,
• The duration of the marriage or de facto relationship and the extent to which it has affected the earning capacity of the party whose maintenance is under consideration,
• The Child Support payments that a party has provided, is to provide, or might be liable to provide in the future for a child of the marriage or de facto relationship, or
• Any fact or circumstances which, in the opinion of the Court, the justice of the case requires to be taken into consideration.

The circumstances must be considered for each party and then weighed against each other so that, where one (1) party has future needs that outweigh the other party’s, there is likely to be an adjustment of the contributions-based Property Division in their favour.

In practice, assessing future needs can be quite straightforward where both parties are of a similar age and state of health and one (1) party has the care of young children and cannot earn an income. It is quite clear in such a case that the future needs of the party with the care of the children outweigh that of the other party and that there should therefore be an adjustment of the assets in their favour.

However, in cases where each party has considerable future needs, it may be difficult to determine which person, if any, has the greater future needs. Each person may have poor health and be unable to earn and income but, where neither party has future needs factors that outweigh the other person’s, there will not be an adjustment.