In this information sheet, we explain what a family law property settlement is, how negotiation and mediation are used in a settlement and what happens afterward.
When a relationship (either a marriage or de-facto) breaks down, the assets and liabilities of the relationship will ordinarily need to be divided between the two parties in the relationship.
The assets and liabilities of the relationship can include any asset or debt owned by either party or jointly during the relationship, whether they were acquired prior to the relationship commencing, or during the relationship. Assets and debts acquired post-separation are generally not included, unless they were acquired using an asset of the relationship, or to pay off a debt from the relationship.
Property matters can be settled in multiple ways. The first is outside of Court through the process of negotiation. The second is through the process of mediation. If negotiation and mediation are unsuccessful and the couple cannot reach an agreement, both the Family Court of Australia and the Federal Circuit can make orders in regard to financial matters. What Court is the appropriate Court to determine your matter depends on various factors, including the value of the property pool, and circumstances of your parenting matter, if you also have children.
The first option is to attempt negotiation and/or attend mediation and discuss a possible asset division. Orders will only be able to be made following mediation or negotiation if each party can come to an agreement as to how the assets should be divided.
Mediation and/or negotiation is a far quicker process and is significantly less expensive than proceedings in the Court. For this reason, it is usually preferable to attempt to negotiate a settlement, or attend mediation, prior to commencing Court proceedings.
Negotiation will involve ongoing informal discussions between each party (or their solicitors if they instruct solicitors) to determine what asset division will be agreed. A mediation involves a more formal discussion over a period of a few hours, facilitated by an independent person (the mediator). You can attend mediation with or without a solicitor.
Prior to commencing negotiations or attending mediation however, you need to know what assets and debts are in the property pool, what the values of each are, and what the total net value of the property pool is. This is determined by a process known as financial disclosure, where each party provides the other party all relevant financial documents, such as bank statements, house appraisals/valuations, business activity statements, superannuation statements, tax documents and any other relevant record.
If mediation or negotiation is unsuccessful, you will need to an application to the Court seeking property orders. You will need to file an Initiating Application, an Affidavit and a Financial Statement. The Application will set out the Orders you seek, the Affidavit will set out the evidence you rely on in support of your Orders and the Financial Statement will set out your income, expenses, assets and debts.
When the matter first proceeds before Court it will usually go before a Registrar, and not a Judge. The Registrar can only make certain Procedural Orders and Orders by consent. If your matter is unable to be resolved on the first occasion, the Registrar may need to refer your matter to a Judge for further Orders to be made.
If agreement is not reached early on in the proceedings, the Court will generally require the parties to attend a Conciliation Conference with a Registrar of the Court. This is similar to a mediation and if agreement is reached, Final Orders can be made. Many matters settle at Conciliation.
It is important to be aware of the time limits for commencing proceedings for Property Orders. If you were married, you have twelve months after finalisation of the divorce to file an Application for Property Orders. If you were in a de facto relationship, you have two years from the date of the breakdown of the relationship to commence proceedings. If these time limits have passed, you will need to ask to court to grant you permission to file an Application.
The goal of a property settlement is to reach a split of the asset pool that is just and equitable. There is no set formula for this process. However, the principles are the same regardless of whether the parties were married or de facto. The Court will look at:
– What the assets and debts are and the value of these and of the whole pool;
– The direct financial contributions each party made e.g. salary earnings, paying of the mortgage and paying of day-to-day expenses, such as bills, groceries etc;
– The non-direct financial contributions each party made e.g. inheritance from deceased estates or gifts from family;
– The non-financial contributions each party made e.g. raising children, and attending to home maintenance;
– The future requirements of the parties with possible reference to the age, health, care of children, ability to earn income or financial resources.
The Court will make a financial order that divides the assets in accordance to the above factors. There is no definite outcome in property settlement cases. The division could be a 50/50 split if there have been equal contributions made by both parties. Likewise, if the contributions have not been equal, this will be reflected in the division.
The Court also considers whether the relationship was long or short. In long relationships the Court will start at the position of each party receiving 50% of the net pool, and make adjustments for contributions and future needs. In short relationships, the Court will start at the position of each party walking away with what they brought into the relationship, with adjustments to be made for contributions and future needs.
It varies case to case in regards to what is a long relationship and what is a short relationship, but like in Harry Potter, the magic number is often seven. That is a short relationship is seven years or less and a long relationship is in excess of seven years.
If you have engaged in negotiation or mediation with your ex-partner and reached an agreement, you need to have the agreement reflected in writing, to be signed by both of you. This is important for several years, but primarily because a written document in the proper form will give both of you an exemption from any stamp duty which may arise from the transfer of assets (for instance, real estate).
The two documents which can be drafted are Consent Orders and a Binding Financial Agreement.
However, it is advisable to opt for Consent Orders, as these are more easily enforced by the Court if they are not complied with. Binding Financial Agreements can more easily be set aside, causing significant issues, expense and complications for both you and your ex-partner. The matter of Thorne & Kennedy is a clear authority on why Binding Financial Agreements should be avoided like the plague (or someone with Covid-19).
If your matter is in Court, you have far less freedom to decide how the eventual split will be documented as the Court will simply make Orders. If agreement is reached during the proceedings and the Judge is satisfied the asset split is just and equitable, the Court can make Orders by consent and finalise the matter. If agreement cannot be reached the Court will make a decision after a Final Hearing.
Whilst you can’t be forced to instruct a solicitor to assist you in your property settlement, it is highly advisable that you do seek legal advice. Family Law property settlements are a difficult area of law, and it is in your best interests that you receive legal advice, so you know what you are entitled to, and so you can ensure your best interests are assured.
This information sheet provides general information only. Each case is different, and different things need to happen for different people. If you need assistance with a family law property settlement, contact us today so we can help you. You can either call us on 02 4050 0330, or book an appointment online.