Divorce can be one of the most challenging experiences in a person’s life, not just emotionally but financially as well.
One of the key concerns during a divorce is how the assets are going to be split. In Australia, the process of dividing assets isn’t always straightforward, and understanding the steps involved can help you navigate this challenging time with clarity and confidence.
At Ramsden Family Law, we are committed to guiding you through this process with expertise and compassion, ensuring that your rights are protected and your future is secured.
Below is a guide on splitting assets between separated couples in Australia.
Understanding the Separation of Finances and Property
When a couple separates, whether from a marriage or a de facto relationship, dividing your property becomes a focal point of the divorce proceedings.
However, it’s important to recognise that divorce and property settlement are two separate legal processes. Divorce legally ends the marriage, while property settlement deals with how assets and liabilities are divided.
A binding financial agreement (BFA) is a legal document that can be established before, during, or after a relationship, including its use as a prenuptial agreement. These agreements dictate how assets will be divided in a divorce and are enforceable unless exceptional circumstances arise.
In Australia, there is no fixed formula for dividing assets—each case is distinctive, and the division is based on what is fair and equitable according to the specific circumstances of the parties involved.
For more detailed information on property settlements in Australia, you can read this resource from Family Relationships Government Australia.
No-Fault Divorce
Australia operates under a no-fault divorce system, which means that the court does not consider why the marriage ended. The only ground for divorce is the irretrievable breakdown of the marriage, demonstrated by 12 months of separation. This can include situations where the couple is still living under the same roof but no longer living together as a couple.
Once you have decided to separate, the next step is to address how your assets will be divided. A divorce settlement can be complex, involving family courts if agreements cannot be reached, and factors such as child custody and financial needs significantly impact the final settlement.
To learn more about no-fault divorce in Australia, take a look at this ABC News article.
The Four-Step Process for Asset Division
Australian courts follow a structured four-step process to determine the division of assets and liabilities:
The Family Law Act outlines the legal framework governing divorce proceedings, including how couples can resolve asset division or seek financial orders through the court and the factors considered by the Family Court in such matters.
Read more about the Family Law Act.
Identifying and Valuing the Asset Pool
The first step in property division involves identifying all the assets, liabilities, and financial resources of both parties.
This includes:
- The Family Home
- Vehicles
- Businesses or Business Interests
- Investment Properties
- Financial Investments (e.g., shares, bonds)
- Superannuation
- Personal Property (e.g., jewellery, collectibles)
- Debts and Liabilities (e.g., mortgages, loans, credit card debt)
It’s crucial to note that assets acquired before, during, and after the marriage are considered, as well as any inheritances or lottery winnings. So are international assets.
Superannuation is treated as part of the asset pool, but it may be considered separately depending on the circumstances.
Assessing Contributions
Once the assets and liabilities are identified, the next step is to evaluate the contributions of each party. These contributions can be:
- Financial Contributions: Such as income, savings, and direct payments towards the acquisition or improvement of assets.
- Non-Financial Contributions: Such as homemaking, caring for children, and maintaining the family home. These contributions are equally important and can significantly impact the division of assets.
The court will also consider whether one party has wasted assets, such as through gambling or reckless spending, which can lead to adjustments in the settlement. Understanding these factors is crucial to splitting assets fairly during a divorce.
Considering Future Needs
The third step involves assessing the future needs of both parties. Financial support is crucial in this context, as it helps ensure that both parties can meet their future financial needs post-separation. The court considers factors such as:
- Age and health
- Income and earning capacity
- Care and support of children
- The financial circumstances of any new relationships
These factors may lead to an adjustment in favour of one party, particularly if they have primary care for young children or if their ability to earn an income has been compromised.
Ensuring a Just and Equitable Outcome in Property Division in Divorce Australia
Finally, the court ensures that the proposed division of assets is just and equitable for both parties, considering how assets are divided in a divorce. This involves taking a step back and examining the overall effect of the division to ensure that neither party is left in an unfair position.
Practical Considerations: Real-Life Scenarios
To help you better understand how this process might apply in real life, let’s consider a hypothetical scenario:
The family court plays a crucial role in asset division, assessing future needs, determining split assets, and handling the complexities when couples cannot reach an agreement, which involves both the emotional and financial implications of litigation.
Example Case
John and Sarah have been married for 15 years and have two children, aged 10 and 12. They own a family home worth $1.2 million with a mortgage of $400,000, two cars valued at $50,000, and have combined savings of $100,000.
John’s superannuation is valued at $300,000, while Sarah’s is $150,000. John has been the primary breadwinner, while Sarah took a part-time job after their second child was born to manage the household and care for the children. Sarah continues to be the primary carer of the children and is unable to earn an income like Johns.
In this case, the court would consider John’s higher financial contributions but would also recognise Sarah’s non-financial contributions as a homemaker and primary caregiver. This might mean they both are seen as relatively equal based on their respective, but different contributions. Going into the future, Sarah’s role as the primary carer for the children and her lower earning capacity, might mean that the court might decide on a division that favours Sarah with an adjustment above 50% to take into consideration these future needs. This is a case example and it is crucial for both parties to obtain independent legal advice to understand their rights and obligations, ensuring a fair and informed settlement.
Seek Legal Advice with Ramsden Family Lawyers
Dividing property can be complicated and emotionally taxing, so it is crucial to seek legal advice.
At Ramsden Family Law, our team of experienced family lawyers is here to provide you with expert guidance, ensuring that your interests are protected throughout the process. Whether through negotiation, mediation, or court proceedings, we work tirelessly to achieve the best possible outcome for you.
Learn more about our property settlement services.
If you’re facing a divorce or separation, don’t hesitate to reach out to us for a consultation.
We offer personalised advice tailored to your unique circumstances, helping you begin the process of securing your financial future.
Posted in: Divorce
September 12 2024
