Property Splits – How are they calculated?
Separations are already difficult without having the added confusion of how property matters are approached in the family law process. We take this opportunity to go through the basics involved in the process, and the issues that must be taken into account by the Court, in determining property matters.
The Four-Step Process This is the primary way in which the Court’s prefer to approach the determination of the appropriate property division.
In determining an application under section 79 of the Family Law Act (where parties are/were married) or s 90SM (where parties are/were in a de facto relationship), “[t]he case law reveals that there is a preferred approach … that approach involves four inter-related steps”: Hickey and Hickey(2003) 30 Fam LR 355 at ;  FamCA 395.
Step 1 Step 1 involves identifying the property, assets, financial resources and liabilities that will make up the asset pool of the parties of the proceedings, the ownership and value of those assets, and the amount of liabilities and responsibility for payment of those liabilities.
Step 2 In Step 2, the Court is required to make a determination (based on the various contributions identified in s 79(4) of the Family Law Act as to whether there should be an adjustment in ownership of property, as a consequence of the contribution factors. That is, the Court hears evidence of past history.
Contributions include initial contributions (assets and liabilities you brought into the relationship), financial contributions and non-financial contributions (i.e. the role of homemaker or parent, or say, renovations and maintenance of the house).
Step 3 In Step 3, the Court is required to decide, on the basis of the various s 75(2) factors, also called “needs factors”, whether there should be any further adjustment of ownership of assets. That is, the court looks to the future. Matters which will be taken into consideration will be issues such as each person’s future earning capacity, whether they are going to be the primary carer for any children or other dependents, any health issues or disability that the person might have, employment prospects and other such matters which may impact their “future needs”.
Step 4 Step 4 requires the Court to ask and determine whether the proposed orders for adjustment of property are “just and equitable”.
Other factors which may be taken into consideration will be special contributions such as inheritances, windfalls, lottery wins, settlement payments, and other lump sum financial contributions which impacted the asset pool of the relationship.
The length of the relationship will also affect how those contributions are viewed by the Court. For example, in a very lengthy relationship, an initial contribution made by one party (such as a lump sum amount of money) that went towards the purchase of a matrimonial home, would likely carry less weight than such a contribution in a short relationship.
At the end of the day, each person’s circumstances will be unique to them and it is part of the solicitor’s role to gauge how the various factors which might impact their settlement would be approached. The initial advice you receive can alter the way you approach any negotiations you have and ultimately, whether you end up in Court.
If you have recently separated and wish to discuss your family law matter with one of our experienced solicitors, you should contact us to have an obligation free chat on (03) 9498 0550.