When relationships break down, there’s a lot to consider – including the division of property and finances.
Property and finance
When a marriage or de facto relationship breaks down, it’s inevitable that property and finances have to be sorted out. This is dealt with by either the Family Court or Federal Magistrates Court for both married and de facto couples, except in Western Australia, where de facto couples need to use the state Family Court of Western Australia.
Property includes all the assets, for example the couple’s home, investment real estate, funds in banks, building societies, credit unions and other financial institutions, life insurance policies, cars, interest in businesses, shares in companies, household contents and other personal property. Superannuation is also taken into account.
It’s important for couples to fully disclose details of all assets, plus all their financial information, to each other and the court.
If the couple agrees how to split the property and finances, they can formalise this by making a consent order. This has the same legal effect as a court order. The court will only make a consent order if it’s satisfied that it is properly written and that the terms are ‘just and equitable’.
If the couple can’t agree, they will have to apply to the Family Court or Federal Magistrates Court for financial orders. There are two types of financial orders:
- property, which deals with the division of property, income and other financial resources
- spousal maintenance, which provides for financial support of husbands, wives, former husbands and former wives.
When an application is filed in the Federal Magistrates Court, it goes to the court first and then to a conciliation conference or to private mediation. It’s often cheaper and quicker to have a matter dealt with by the Federal Magistrates Court.
When an application is filed in the Family Court, there will be a case assessment conference followed by a procedural hearing. These involve a deputy registrar, and are intended to help the couple reach an agreement. If they still can’t agree, the court will set up one of the following:
- further mediation with a counsellor
- financial mediation in a conciliation conference or
- joint mediation (if issues concerning children are also involved).
If all these are tried and there’s still no agreement, the dispute will be determined by the Family Court in a full hearing. There’s no formula that is applied to resolve property and financial disputes. Each case is determined on its own facts and merits. This means that the division of assets (what someone owns) may vary substantially from family to family.
When determining a case, the following general principles are taken into account:
- the nature and value of assets compared with what is owed on them
- direct financial contributions to the marriage (usually salary/wages earnings)
- indirect financial contributions (such as gifts and inheritances)
- non-financial contributions to the marriage, including caring for children and home making
- future needs, including financial resources and ability to earn.
Enforcement of financial orders
Family Court financial orders, whether made by consent or determined by the Court, can be enforced by one party seeking orders under Section 106A of the Family Law Act. For example, if one person is trying to avoid the effect of the financial order by not signing papers, the court can make an order appointing a third person, usually an officer of the court, to sign the documents. Applications for enforcement orders need to be made to the Family Court if there are proceedings currently in that court; if there aren’t, the application needs to be made to the Federal Magistrates Court.
Under the Family Law Act, a person has a responsibility to financially support their husband or wife (spouse), if their husband or wife can’t meet their daily living expenses from their own resources and the other spouse has the capacity to meet those needs. Payments made to support a husband or wife (or a former husband or wife) are called spousal maintenance.
Spousal maintenance isn’t automatic. The needs of the husband and the wife are taken into account, and several factors are considered, including:
- the age and health of the spouse needing support
- the income, property and financial resources of each spouse
- the ability of each spouse to work
- whether or not the marriage has affected the ability of either spouse to earn income.
Spousal maintenance must be applied for within 12 months of a divorce becoming final. Applications after this can only be made with permission from the court (which isn’t automatically given).
Proceedings for spousal maintenance take place in the Federal Magistrates Court, or in the Family Court if there are other proceedings underway in that court.
De facto relationship partners can now also bring proceedings for spousal maintenance under the Family Law Act.
Financial agreements (pre-nuptial agreements)
Since December 2000, it’s been possible for people who are married or going to be married to make a binding, legally enforceable agreement about what will happen to their financial arrangements if their marriage breaks down. These agreements are often called ‘pre-nuptial agreements’, but the correct legal term is financial agreements.
Financial agreements can be made before, during or after a marriage. To be legally binding, both people must sign the agreement and both must receive, before signing the agreement, independent legal and financial advice about it.
Financial agreements can deal with financial settlement (including superannuation entitlements) and financial support (maintenance) of one spouse or the other after marriage.
The court can declare a financial agreement invalid if a precondition for it (such as receiving independent advice) isn’t met or if fraud is involved (including failure to disclose honestly the full details of a person’s financial position).
The law regarding financial agreements is still evolving, and there’s scope for confusion and error which can lead to the agreements being unenforceable. An alternative is to file consent minutes with the court. The court needs to agree that the order is fair before it’s sealed. Consent orders are less likely to be overturned or departed from if they are challenged later.