How does property settlement work after separation?

After parties separate, they are looking to divide their assets between them. This will either be by agreement, or if no agreement can be reached, then one party can commence an action against the other for a court to determine how the assets are divided.

Assets such as the family home, blocks of land, bank accounts, furniture, cars, shares and interests in business are all property.  Property has a very broad meaning at law and includes everything that is capable of being owned.

The Family Court of Australia and the Federal Circuit Court of Australia (FCC) (combined referred to as the Family Law Courts), draw a distinction between property and financial resources. 

Property is capable of being distributed between the parties by way of property settlement on the breakdown of a relationship, while financial resources are not.  Since 28 December 2002, superannuation is capable of being considered as property, not just a financial resource.  A person’s interest in a family trust may be a financial resource if they do not control the trust.

This distinction is important because if the court determines the person’s interest is:

  • Property - then the value of the property will be able to be included in the pool for division.
  • A financial resource – this will not be included in the pool, but may be brought to account by allocating a greater share of the pool for division to the person who does not have the financial resource.
  • Neither property nor a financial resource but a mere expectancy (eg an interest under a Will where the person who made the Will is still alive) or the person has no interest at all, then the value of that item or thing will be excluded from the pool and will ordinarily have no bearing upon the outcome of the property settlement.

 Throughout a marriage, property is usually accumulated by the couple.  The Family Courts can make orders to alter existing property rights so that it doesn’t matter whose name the asset is in, the court considers it to be part of the property pool.  Courts can also issue injunctions; for example, restraining one party from selling an item, or stopping them resigning control out of a Trust, on an application from one of the parties.

The Family Law Act now applies to de facto couples (whether heterosexual or same sex) who separated after 1 March 2009 or those who separated prior to that date but agree to opt in to the Family Law Act.  

If you are in a de facto relationship, you have 2 years after separation to file an application for property settlement, if you cannot reach agreement with the other party. 

Before the parties can bring an application before the Family Court of Australia, they must engage in “pre-action procedures” which means complying with duty of disclosure, negotiating with your partner either yourself or through your legal advisor, or mediation, conciliation, counselling or arbitration. 

It is highly recommended that you engage this procedure even if you are considering bringing your application before the Federal Circuit Court (FCC). For financial matters the FCC do not make it mandatory for parties to attend mediation or a family dispute resolution before they initiate proceedings. The FCC deals with most property matters, and only complex matters are filed with the Family Court of Australia.  Once filed, the court manages the progress of a case through to a hearing.  It is worth bearing in mind that over 90% of cases settle before it is necessary to have a hearing.

The court, when altering the property interests of the parties, takes into account provisions of of the Family Law Act in a four stage process:

  1. Determine if it is just and equitable to make an order;
  2. Determine the property pool (assets and liabilities);
  3. Assess how the property is to be divided by assessing the contributions to the property pool by the parties (or by third parties on their behalf); and
  4. Consider other relevant factors such as future needs.

Our How does property settlement work after separation? Team

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