One of the most common issues, when partners separate, is deciding how to divide the property and debt accrued by the parties during the relationship.
If an agreement between the parties cannot be made, and dispute resolution avenues such as mediation prove unsuccessful, a party to the dispute can apply to the Federal Circuit and Family Court of Australia (‘the Court’) for an order which can include orders relating to property division, finances, and payment of spousal maintenance.
Generally speaking, when the court makes financial orders, the Court is required to follow a four-step process.
- Firstly, whether it would be just and equitable to make a property settlement order.
- Secondly, identify and value the property pool of the relationship;
- Thirdly, assess the contributions made by the parties to the acquisition of the property; and
- Finally, the court assesses the future needs of the parties.
1: ‘JUST AND EQUITABLE’
How the court determines what is just and equitable is determined according to existing legal principles and the existing interests of the parties.
In essence, what the court is doing here is ensuring that it would be fair to make a property order in the circumstances.
In many cases where an application is made for a property settlement order, the just and equitable requirement is satisfied by observing that, there will no longer be shared use of property by the parties.
2: IDENTIFYING AND VALUING THE ‘POOL’ OF PROPERTY
Property is legally defined as an interest an individual has in something. Common examples include real property (land) and personal property (items).
If the parties disagree on the value of an item the court will determine its value, rather than split the difference.
Often, the parties can agree to jointly pay for an independent valuer to determine the value of contentious items.
The Court also considers the liabilities, or debts, that the parties owe to third party creditors as this will ultimately detract from the value of the property pool. A common example is a mortgage.
3: ASSESS CONTRIBUTIONS
Next the court will look at the contributions each party has made to the acquisition of the property.
Section 79(4) of the Family Law Act 1975 says that the court shall consider:
- direct or indirect financial contributions (e.g., income)
- direct and indirect non-financial contributions (e.g., maintaining or improving a property) and
- contributions to the welfare of the family including any contributions made in the capacity of homemaker or parent.
The Court will not only look at property that is purchased during the relationship but will also consider property brought into the relationship by a single party and property purchased after separation.
The court will also consider.
- Gifts made to the parties of the relationship.
- Property inherited by a party to the relationship.
- Lottery winnings.
- Long service leave and redundancy payments; and
5: FUTURE NEEDS OF THE PARTIES
Finally, the Court will also consider the future needs of the parties. The relevant legislation is Section 75(2) of the Family Law Act. Here the court considers several factors including but not limited to:
- The age and state of health of each of the parties;
- The income, property, and financial resources of each of the parties;
- The parties capacity for gainful employment.
- Whether either party has the care of a child of the marriage.
- Whether the parties are responsible for supporting any other person.
- Whether either party is eligible for a pension, allowance or benefit from either the government or a superannuation scheme.
- Ensuring that the parties can maintain a standard of living that in all circumstances is reasonable.
If you require any advice from a top Sydney divorce lawyer in relation to your family law matter, please don’t hesitate to contact us on (02) 8379 1892 or nevans@barkerevans.com.au.