Alecia Connor and Samantha Chai
What’s actually involved in getting ‘divorced’ or separated? A whole lot more than meets the eye, including arrangements for children, the legal process of divorce in the eyes of the law and most importantly the legal division of assets and liabilities via a property settlement.
There are various ways you can finalise the division of your finances and property:
- Parties can agree on how property should be divided amicably without court involvement. Where parties agree on an arrangement, they can apply to formalise their agreement by applying for consent orders in the Family Court of Australia or by entering into a Binding Financial Agreement; or
- Where parties cannot reach an agreement, parties can apply to the Federal Circuit Court or the Family Court for financial orders relating to the division of property and payment of spousal maintenance where relevant.
Importantly though, you only have 12 months after the date of your Divorce Order to make an application to the courts to finalise your property settlement. There is a two year time limitation following the breakdown of a de facto relationship for a court application as well. If an application is not made within these timeframes, parties will need special permission of the court, which is not always granted. It is possible to reach agreement outside of the court although if these timeframes have passed it could limit your ability to legally enforce or later contest the division.
Dividing your assets outside by consent
The primary advantages of reaching an agreement without going to court are saving precious resources like your time and money, as well as heartache. Specifically, you can avoid the stress that prolonged proceedings can bring and have a greater degree of certainty around what you are receiving, as opposed to the uncertainty of waiting for a judicial officer’s decision.
Consent orders are written agreements approved by the courts which have the same effect as a court order made by an official of the court following a court hearing. They may deal with the transfer or sale of property, spousal maintenance and the splitting of superannuation, all of which are considered during a property settlement.
The Family Law Act 1975 also provides for financial agreements that can be made following a divorce order, covering financial settlements (including superannuation entitlements), financial support of one spouse by the other and further incidental issues. In order for financial agreements to be binding, both parties must have received independent legal advice prior to signing.
What factors will a court consider?
Realistically not everyone is able to reach agreement and the intervention of the court is sometimes needed. In determining how to divide assets and liabilities the court will take this four step approach:
- Identify the net property pool;
- Assess the parties’ contributions;
- Assess the parties’ future needs; and
- Consider whether the outcome reached is just and equitable.
The first step is for the parties to identity the assets, liabilities, and superannuation interests that form the ‘property’ pool (think financial pool). This is undertaken by listing all of the assets and liabilities held by the parties and determining the values of each item. Sometimes the parties agree on the values and at other times parties will be assisted by exchanging financial documents which provide evidence of value. In some situations a valuer may be appointed to provide a formal valuation of an item based on their expert knowledge.
The second step involves assessing the contributions of each party throughout the course of the relationship. These can be either direct, indirect (through family members), financial (through income) or non-financial (renovations or improvements to a property) or made as a homemaker or parent. A contribution will be assessed as a range of percentages or as a percentage of the overall net asset pool.
Thirdly, there is an assessment of the parties’ current and future financial circumstances such as their age, state of health, who will have primary care of the children, the length of the relationship and impact on each parties earning capacity and whether one party has a more substantial earning capacity to the other. Adjustments to the percentage or percentage range from step two will then be made to reflect such future needs.
Lastly, the court will assess whether the percentage allocated to each party of the net pool and or division of assets to be allocated to each party is just and equitable given the overall circumstances of the case. This is based on your personal circumstances and will never be the same as your neighbour’s brother’s outcome.
Your property settlement will be unique to you and the relationship in question. While the process may seem straightforward there are a lot of factors to consider. You can learn more through our free guide How to divide your property and why.