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The Family Law – Property Settlement Process The Family Court System in Australia Applicable Laws The Australian Constitution divides power between the States and the Federal (Commonwealth) governments. The Federal parliament has the power to pass laws affecting the whole of Australia on specific subjects defined by the Constitution, this includes the area of family law. The Family Law Act 1975 was passed by the Federal parliament and applies to the whole of Australia. It covers all aspects of family breakdown including separation and divorce, property settlement following marriage breakdown, spousal maintenance and child care issues. It relates to the parenting of children regardless of whether the parents were married or not. Some areas of family law are however still governed by State parliaments. Please note: Property disputes between de facto couples are governed by separate State Laws and are not covered in this paper. Applicable Courts The Family Law Act set up two Family Courts, The Family Court of Australia and the Federal Magistrates Court. The practice and procedure of these Courts are contained in the Family Court Rules 2004 and the Federal Magistrates Court Rules 2001. The majority of applications can be filed in either Court however the Federal Magistrates Court does not have powers to deal with adoption, property disputes when the value is over $700,000 (except with the consent of both parties) and issues concerning the validity of a marriage. Applications for divorce should be filed with the Federal Magistrates Court. The Federal Magistrates Court aims to provide a quicker, cheaper service. In practice, straightforward applications which can be determined at the first hearing date should be filed with the Federal Magistrates Court. Your solicitor will be able to advise you on the most suitable venue for your case. The Child Support Agency governs all applications for financial support for children born on or after 1/10/89, children whose parents separated after 1/10/89 and children whose siblings were born after 1/10/89. The approach taken by the Courts The Courts apply basic principles contained in the Family Law Act which encourages parties to reach agreement without the need for a Court hearing. Except in limited circumstances, parties are required to demonstrate that they have tried other ways of resolving their differences before seeking the intervention of the Courts. There are very good reasons for this. Family breakdown is a difficult and stressful time for all concerned, particularly children. Courts encourage the amicable settling of family affairs to save time, expense and further distress. Legal fees can be expensive and Court proceeding are often time-consuming and stressful for all concerned. If parties can reach mutual agreement then arrangements can be put in place much more quickly thus reducing the period of uncertainty and enabling parties to get on with their lives. A mutual agreement has the advantage of making the participants feel that they have had some say in the decision making process rather than waiting for a Court decision. Agreements are far more likely to be adhered to if reached amicably and without resentment. In the event that an application is lodged, Courts are not concerned with apportioning blame but rather with finding workable and fair solutions. For this reason the principle of the no-fault divorce was established and the only ground for divorce in Australia is the irretrievable breakdown of the relationship which must be


demonstrated by a 12 month separation. Courts make decisions on applications involving children on the basis that the best interests of the child is the main consideration. The need for legal advice Before making any decision about whether to consult or hire a solicitor, it is important to think carefully about your goals. The purpose of this kit is not to provide specific legal advice but to provide useful information to enable you to make informed decisions. Your time (and money!) will be better spent with a solicitor if you have some idea of your options and what you would like to achieve. To that end AussieLegal can assist with a number of ancillary services (see Further services below). Why is a solicitor necessary? Decisions made after the breakdown of a relationship especially where children or finances are involved can have a huge impact on your future happiness and welfare. It is important to obtain the advice of an experienced solicitor to protect your legal rights and financial interests. Solicitors are better placed to achieve your goals and can navigate you through the legal procedures involved which can seem complicated and confusing. A solicitor can also advice you on what you can realistically achieve. Choosing and appropriate solicitor can be a difficult task, however. How soon should I consult a solicitor? Once you have considered the issues and made the decision to seek legal advice, the answer is as soon as possible. The rules both in the Family Court and Federal Magistrates Court have now imposed deadlines which must be compiled with. You will need to provide quite a bit of information for your solicitor and he or she will need time to prepare your case properly. You may also find some peace of mind by getting the ball rolling and trying to resolve issues as quickly as possible particularly when there are children involved.

Property Settlement Calculator A financial settlement means the division of a married couple’s financial resources on separation. The Family Law Act 1975 sets down the applicable law in relation to the division of property or liabilities (debts) of people who have been married. However, if you have never been married, the appropriate laws which govern your financial situation are the laws of the State where you live. The meaning of property Property can include your home, any other real estate, funds in banks, building societies, credit unions of other financial institutions, investments, life insurance policies, an interest in a business, household contents, any other personal property and Superannuation. “Property” means the property to which a party to a marriage is entitled whether in “possession” (which means entitled to it now) or “reversion” (which means entitled to it at some later time). IMPORTANT: It makes no difference in whose name property is held. Property held by either party to a marriage comes within the definition of matrimonial property and will be taken into account by the Court. It may be relevant however whether the property is question was acquired before during or after the period of the marriage but this will be discussed below. The powers of the Family Court


The Family Court has wide powers to make orders altering the interests of parties of a marriage to property of the parties to a marriage. This will determine how your property, financial resources and debts should be shared between you. Who can make an application? The applicant (that is the person applying) and the respondent (that is the other party) must be parties to the marriage. That means they must be married, be separated or be divorced. It also includes parties to a marriage that has been declared void. At least one of the parties to the proceedings must be present in Australia when the application is filed, or at that time be an Australian citizen or resident. The Family Law Act was recently amended to allow a creditor or any other person who may be aversely affected by the making of a financial settlement order to become a party to proceedings. This could include any children to the marriage. The timing of the application Applications for financial orders can be made at any time following separation. There is no requirement to wait until 12 months have elapsed. However, once an application for divorce has been made and a decree absolute dissolving the marriage ordered, parties have only 12 months within which to make an application for property settlement and/or spousal maintenance (the subject of the following section). In limited circumstances, the Court may give you permission to apply outside this time limit but you would need to supply an affidavit (sworn statement) setting out reasons why the application was made late. You should not assume that this permission would be granted. This 12 month time limit also applies to orders made by Consent. The importance of reaching agreement where possible Parties are encouraged to reach agreement as to how divide their property and liabilities (if any) wherever possible. You will avoid costly legal bills and have some certainty about the outcome of your negotiations. This is a very complicated area of law and each case is different. It is difficult to predict with any degree of certainty the exact outcome of any application you may make. The Court is obliged to consider a number of factors in reaching a decision and can exercise a considerable amount of discretion in reaching a decision. You are likely to face a period of uncertainty whilst waiting for the decision of the Court. If you are unable to reach an agreement, the Court will be able to refer you to professional agencies who will be able to assist you in negotiating an agreement. If you are able to reach an agreement, it is possible to formalise that agreement and make it binding by applying to the Court for a Consent Order. The Court will need to be satisfied that the order is properly drafted and that the terms are “just and equitable�. If you do file an application, you will be required to demonstrate that you have followed the pre-action procedures described in previous chapters. The need for legal advice


The decisions you make about property settlement are some of the most important financial decisions you can make. You may be under considerable emotional and financial stress when your marriage breaks down. If you try and negotiate a settlement without the benefit of legal advice you may find that your contributions to the marriage are not fully recognised and your welfare needs are not fully met. Parties can sometimes experience a drastic fall in living standards when they divorce. In practice single mothers and older women are particularly vulnerable. This is a complicated area of law and it is important to be fully informed about your rights. Whilst it is difficult to predict the exact outcome at Court, an experienced solicitor will be able to give you some guidance about what to realistically expect drawing on experience in negotiating settlements and conducting trials. This is turn may assist you in negotiating an agreement, protecting your interests and avoiding the legal costs associated with a Court hearing. Effect of a pre-nuptial agreement Some couples decide to make a legally binding agreement about their financial arrangements in the event that the marriage breaks down. These agreements can be made before marriage, during marriage or after separation. The legal term for these agreements is ‘financial agreements’. To be legally binding, these agreements must be signed by both parties and both parties must have sought independent legal and financial advice. Courts can declare these agreements to be invalid if the conditions mentioned were not met, there is evidence of fraud, they were entered into for the purpose of defeating legitimate creditors, or the circumstances have changed making the agreement impracticable. What to do if you believe that your spouse may be seeking to hide or sell property? Parties have a duty to make full and frank disclosure about their financial situation. You should consult your solicitor if you believe that your spouse is not complying with this requirement. Any orders made by the Court may be set aside or varied in the event that parties fail to make full disclosure. If you believe that your spouse wishes to sell property, you can apply for an Interim Order prohibiting the sale of assets until a final settlement has been reached. Superannuation Splitting Laws effective as of 28 December 2002 The Family Law Legislation Amendment (Superannuation) Act 2001 (FL Super Act) provides for the payment splitting of a superannuation interest. Under the superannuation splitting laws, superannuation interests are treated as property for the purposes of property settlement on marriage breakdown. This means that people are able to make an agreement - known as a superannuation agreement - about how any superannuation interests that either party has are to be split in the event of marriage breakdown. A superannuation agreement is like a more general financial agreement in which people can agree about how property other than superannuation is to be divided on marriage breakdown. However, because superannuation interests are different to other property, there are special rules about what a superannuation agreement has to say. Provided that a superannuation agreement complies with the legal requirements detailed in the superannuation splitting laws, the agreement is binding. If a superannuation agreement is binding, then:


• •

the trustee of a superannuation fund is required by law to implement it; and the Court is not able to make an order about the superannuation interest that is dealt with in the superannuation agreement.

If people are unable to agree, then:

• •

the Court is able to make an order, as part of a property settlement order, about how any superannuation interests are to be split; and the Court order is binding on the trustee of a superannuation fund, who has to comply with it, provided that the legal requirements have been complied with.

Do the superannuation splitting laws apply to me? The superannuation splitting laws apply to people who were married and who have divorced. They also apply to people who are still married but who have separated and want to finalise arrangements about their property. They apply regardless of whether people have divorced or separated before the superannuation splitting laws commenced on 28 December 2002 - provided that final arrangements have not been made for their property settlement. The superannuation splitting laws also allow people to enter agreements, either before or during marriage or after separation, about how, in the event of marriage breakdown, superannuation interests are to be split. People are able to enter into a superannuation agreement before they marry, but the agreement does not have any effect if the parties don't, in fact, get married. In these circumstances State law would apply. If you have legally finalised your property arrangements before the superannuation splitting laws commenced on 28 December 2002 then, generally, the superannuation splitting laws won't apply to you. However, if there has been no formal legal arrangement about your property - perhaps because you have made an informal arrangement with your former partner, then the superannuation splitting laws do apply to you. Also, if your property arrangements have been legally finalised but those legal arrangements were subsequently overturned after the superannuation splitting laws commenced, then the superannuation splitting laws apply to you. Do I need to obtain legal advice? Yes. If you don't get legal advice the payment splitting agreement won't be binding on the trustee of the superannuation fund. The basis of the Court’s decision regarding division of property Section 79(4) and of the Family Law Act sets out the matters which the Court must take into account in deciding whether to make any orders altering property interests which can be summarized as follows: 1.

The financial contribution made by each party to the marriage or a child of the marriage, to the acquisition, conservation or improvement of any of the property of the parties to the marriage or to property that used to be owned by both/either party of the marriage;


2. 3. 4. 5. 6.

The contribution (other than a financial contribution) made by a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or to property that used to be owned by both/either party of the marriage; The contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or patient; The effect of any proposed order upon the earning capacity of either party to the marriage; The matters referred to in subsection 75(2) so far as they are relevant (see below); and Any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provide, is to provide or might be liable to provide in the future, for a child of the marriage.

The factors listed in section 75(2) relate both to property settlement (where relevant) and to the issue of spousal maintenance (discussed in the next chapter). These factors can be summarized as follows: • • • • • • • • • • •

The age and health of the parties; The income, property and financial resources of each party; Whether either party has the care of any children under 18; The commitments necessary to support each party and any children or other people; Any responsibilities to support children or other people; Eligibility of either party for a pension, allowance or benefit; Reasonable standard of living where parties have separated or marriage dissolved; Duration of marriage and extent to which it has affected the earning capacity of a party seeking maintenance; The need to protect the party who wishes to continue as a parent; If either party is co-habiting, the financial circumstances of that; Any child support assessment.

The aims of the Court in reaching a decision The Court will reach a decision based on what is just and equitable on the unique facts of your case. The Court will aim as far as possible to make orders which will finally determine the financial relationship between parties. Steps taken by the Court The Court must firstly identify what the assets of the parties are, what the liabilities of the parties are, and what their financial resources are. Financial resources, means people’s superannuation entitlements but can also mean other things. Whether you are negotiating with the other party to try and reach an agreement as to how to divide your property between you, or if it has become necessary for you to commence proceedings in the Family Court, you also need to go through the process of identifying both your and the other party’s assets, liabilities and financial resources. It is sometimes necessary to take steps quite early in the property proceedings to ensure assets are not wasted, or the other party provides you with more information about their financial position. There are applications that can be made to the Court in relation to these matters. After the financial position of the parties is clear, then essentially the Court engages in a two step process:


1.

Identifying the respective contributions (both financial and non-financial) of the parties and allocating an appropriate percentage division of the total property.

2.

Considering the matters under Section 75(2) and the other matters referred to in Section 79(4) of the Family Law Act and identifying what, if any, adjustments should be made to the percentage division after taking those factors into consideration.

General Principles The following principles can be gleaned from an analysis of the statistics relating to the division of property following the breakdown of marriage. It should be stressed that the Courts have a considerable amount of discretion in this area and every case is different. The following general principles are provided as a guide to how the Courts seem to apply the law in this area, but it is important that you seek legal advice regarding your specific situation. In practice, Courts draw a distinction between basic assets and non-basic assets. Basic assets (meaning those that the majority of people have) include bank accounts, the marital home, furniture and other property. Non-basic assets include superannuation, life insurance policy, investments, business rights and inheritances. An analysis of recent case history has revealed the following general observations:

• • • • •

On average women who have custody of the child or children of the marriage receive two thirds of the basic assets and one fifth of the non-basic assets. Women from marriages with lower asset wealth tend to get a higher percentage of the marital assets on settlement. Women from marriages with higher value assets generally receive a lower percentage, but there is a much wider range of results. In terms of contribution, where parties have the majority of their assets as basic assets and the marriage has lasted for some time, the Court will usually regard the respective contributions to be equal. Courts do not usually assess contributions to be equal when considering non-basic assets such as private companies, major assets acquired prior to the marriage and inheritances.

Difficulties associated with asset division Families with relatively low net assets are very limited in the extent to which they can address the respective needs of the parties because their primary asset is commonly the family home usually with a mortgage. Families in this position will typically have limited wealth in non-basic assets such as investments which are more easily disposable. In these circumstances, it is difficult to divide assets in a way that would assist parties with access to immediate financial resources whilst still securing the family home for the resident parent and children. Difficulties associated with single-parent mothers


Traditionally women have played a greater role in home-making and providing the primary care for children. This role may often mean that they have made certain sacrifices in terms of their career development during the course of the marriage. This may lead to some disadvantage in the labour market particularly since their skills may be out of date. Traditionally women have been in a weaker position in the labour market and their earnings lower than men. Marital breakdown can lead to a drastic fall in living standards particularly for single parent mothers and older women. The Court is obliged to take these factors into account. In terms of assessing contributions made during the marriage, non-financial contributions such as home-making and childcare are given equal consideration. The Court will then go on to make an adjustment to take into account the future financial needs of women and children taking into account career prospects and childcare responsibilities. Factors to consider Some of the matters to be considered when negotiating or making an application for property settlement are as follows:

• • • • • • • • •

Superannuation - considerable changes have been introduced by the Federal Government as to how superannuation will be dealt with (see the sub-sections on Superannuation, above); Capital gains tax and stamp duty; Whether it is appropriate in your circumstances for the property proceedings to be adjourned; Cases which involve farms; If there have been inheritances; Unusual contributions; Contributions after separation; Where there are family trusts; Where parties have been involved in companies.

Information to obtain Make a list of what assets, liabilities and financial resources you and your spouse have in your name or which are held on your behalf. Try and obtain documents to prove the existence of those assets, liabilities and financial resources and what their values are now. This proof can be by way of a written, dated appraisal for real estate or other items such as motor vehicle insurance papers, bank statements, credit card statements and superannuation statements etc. Ideally, you will want documents to show the value of those items:

• • •

at the date that you started living with the other party; at the date that you separated; and at the time you negotiate the property settlement.

It may be difficult to obtain these documents. It may well be through the Court process that you can obtain this information and those documents from your partner as they are required to disclose all relevant material.


Property settlement calculator Section 4: detailed case studies DETAILED CASE STUDY 1

• • • • • • • • • • •

Jack and Jill were married for 10 years and have recently had their marriage dissolved. They have 2 children aged 7 and 3. Jack works as a business development manager. Jill worked part-time as a legal secretary but gave up work when their second child was born. They own a home worth $500,000 with a home loan of $200,000 outstanding. The home was purchased with a deposit of $50,000 which Jack had saved prior to meeting Jill. Jack has a superannuation fund worth $120,000. Jill has a superannuation fund worth $40,000. During the marriage Jill inherited $50,000 from a relative. Jack has a bank account with $5,000. He has credit card debts of $6,000. Jill is a keen decorator and has made considerable improvements to their home which has added to its value.

To assist Jack in estimating what the Court might consider a fair division of property given their history and circumstances, Jack creates a list of the most important information and figures that the Court will take into consideration: General Information Date married Date separated Age of child 1 if under 18 years Age of child 2 if under 18 years Age of child 3 if under 18 years Age of child 4 if under 18 years Personal details Who was the primary carer during the marriage? Who worked full time during the marriage? Who decided to separate? Who is currently living in the family home? Who will be the PRIMARY carer after separation? Basic Assets & Liabilities at the time of marriage Bank & credit union accounts Money owing on credit cards Real estate (primary residence) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities Basic Assets & Liabilities now Bank & credit union accounts Money owing on credit cards

1/6/1994 1/10/2004 3

10.3 years 7

Jack Yes Yes

Jack

Jill Yes Yes Yes Yes Jill 50,000

Joint 5,000 6,000


Real Estate (Matrimonial Home) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

500,000 200,000

Superannuation Superannuation at the time of marriage Superannuation now

Jack 60,000 120,000

Jill 20,000 40,000

Non-basic Assets & Liabilities at the time of marriage Investment property (excluding primary residence) Outstanding mortgage Share & cash investments Outstanding investment loans Businesses Outstanding business loans Farms Outstanding Mortgage Inheritances

Jack

Jill

Non-basic Assets & Liabilities now Real estate Outstanding mortgage Share & cash investments Outstanding investment loans Businesses where the person is the sole proprietor

Jack

Jill

Outstanding business loans Farms Outstanding Mortgage Inheritances

50,000

Results Summary of Asset Division

Jack

Jill

Basic net assets at the time of marriage Basic net assets now

50,000 149,500

0 149,500

Non-basic net assets at the time of marriage Non-basic net assets now

0 0

0 50,000

Superannuation at the time of marriage Superannuation now

60,000 120,000

20,000 40,000

Estimated division of net assets $ value of assets

45% 231,205

55% 277,795

509,000

In this case study, the likely division of assets, taking all factors into consideration, is a 55% / 45% split in favour of Jill.


Note: Given the size of Jack’s super fund, if he wishes to maintain the fund as is, it is likely that Jill will get the majority of the equity in their home. Once the Percentage share has been agreed, the Court will make orders concerning the division of the assets on the basis of the final percentage share. If Jack decides that he does not want to preserve his super fund, the Court may order that trustee of the fund split the fund according to the agreed division of assets. Discussion Jack and Jill have 12 months from the date the decree was made absolute and the marriage dissolved to file an application for property settlement or apply for a consent order on the basis of an agreement. A Court would start by assessing their net assets. This figure is reached by adding up their assets and subtracting their liabilities. Basic Assets The Court must then consider each parties’ respective contributions to the marriage - both financial and non-financial. Jack was the main breadwinner and provided the initial deposit towards the purchase of their home. Jill was the primary carer for their children, has contributed her inheritance, added to the value of the home with DIY projects. Given the length of the marriage, the initial asset contributions by Jack and Jill’s role as home maker, the Court is fairly likely to consider the financial and non-financial contributions of each equal. Non-Basic Assets With respect to the non-basic assets such as Jill’s inheritance, the Court will usually allow the party who has control of this group of assets to retain ownership. However, the other party will have the right to a share in the growth in these assets during the period of the marriage. They will also be entitled to a further share if they made any material, direct contribution to the development of maintenance of that asset. In Jill’s case, her inheritance was placed in a deposit account and thus Jack’s claim will be limited to a small share. Superannuation Jack’s superannuation is now a reasonably significant asset. Jill we be entitled to a an equal share of the contributions that Jack has made to his fund since they were married. In the same way, Jack will be entitled to a share of Jill’s super contributions. As Jack’s super is considerably more than Jill’s, these financial resources have a significant impact (around 5%) on the final share of property. Children & Other Factors The Court must then consider the factors contained in section 75(2) where relevant. In this case the relevant factors will include the length of the marriage and the fact that Jill has made a career sacrifice to look after her children. This will affect her future earning potential. There is also the significant responsibility of Jill being the primary carer of the 2 young children. Both these factors mean that the


percentage division of the assets will be adjusted in Jill’s favour. The Court will make a decision based on what is just and equitable.

DETAILED CASE STUDY 2

• • • • • •

Tom and Nicole have been married for 5 years. They have no children. Both owned separate properties when they met. Both properties were sold and the profits applied to the purchase of a joint property. Tom contributed $100,000 and Nicole contributed $50,000. The property is now worth $950,000.

• • • •

They have a home loan with $300,000. They both work full time and earn similar salaries. They both have substantial Superannuation funds and are well provided for in retirement. They have made a similar contribution during the course of the marriage.

To assist Tom in estimating what the Court might consider a fair division of property given their history and circumstances, he creates a list of the most important information and figures that the Court will take into consideration:

General Information Date married Date separated Age of child 1 if under 18 years Age of child 2 if under 18 years Age of child 3 if under 18 years Age of child 4 if under 18 years

1/3/2000 1/5/2005

5.2 years

Personal details Who was the primary carer during the marriage? Who worked full time during the marriage? Who decided to separate? Who is currently living in the family home? Who will be the PRIMARY carer after separation?

Tom

Nicole

Yes Yes

Yes Yes

Basic Assets & Liabilities at the time of marriage Bank & credit union accounts Money owing on credit cards Real estate (primary residence) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

Tom

Nicole

100,000

50,000

Basic Assets & Liabilities now Bank & credit union accounts Money owing on credit cards

Joint


Real Estate (Matrimonial Home) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

950,000 300,000

Superannuation Superannuation at the time of marriage Superannuation now

Tom 50,000 100,000

Nicole 40,000 90,000

Non-basic Assets & Liabilities at the time of marriage Investment property (excluding primary residence)

Tom

Nicole

Tom

Nicole

Summary

Tom

Nicole

Basic net assets at the time of marriage Basic net assets now

100,000 325,000

50,000 325,000

0 0

0 0

Superannuation at the time of marriage Superannuation now

100,000 200,000

90,000 170,000

Estimated division of net assets $ value of assets

54% 550,000

46% 470,000

Outstanding mortgage Share & cash investments Outstanding investment loans Businesses Outstanding business loans Farms Outstanding Mortgage Inheritances Non-basic Assets & Liabilities now Real estate Outstanding mortgage Share & cash investments Outstanding investment loans Businesses where the person is the sole proprietor Outstanding business loans Farms Outstanding Mortgage Inheritances Results

Non-basic net assets at the time of marriage Non-basic net assets now

Discussion

1,020,000


Given that this is a relatively short marriage, the Court will attach more weight to their initial contributions. Their main asset is the matrimonial home. The Court is likely to order that they should each receive back their initial contribution and the increase in the value of the property during the course of their marriage should be split evenly to reflect their equal contributions to the marriage. There are no factors in section 74(2) which should alter the percentage split as they have the same earning potential and both have secure financial futures. DETAILED CASE STUDY 3

• • • • • •

Sara and Ranjif have been married for 15 years. Ranjif’s family owned a shoe shop and Sara worked for him there. Ranjif had shares in some of his family’s businesses. He sold these shares and was able to contribute $700,000 to the value of their first home. During the course of their marriage, Sara looked after their 2 children and worked part-time as a bookkeeper for the family business. Their home is now worth $1.5 million and is their primary asset.

To assist this couple in estimating what the Court might consider a fair division of property given their history and circumstances, they create a list of the most important information and figures that the Court will take into consideration:

General Information Date married Date separated Age of child 1 if under 18 years Age of child 2 if under 18 years Age of child 3 if under 18 years Age of child 4 if under 18 years

1/6/1990 1/10/2005 10 13

15.3 years

Personal details Who was the primary carer during the marriage? Who worked full time during the marriage? Who decided to separate? Who is currently living in the family home? Who will be the PRIMARY carer after separation?

anjif

Sara

Yes Yes

Yes

Basic Assets & Liabilities at the time of marriage Bank & credit union accounts Money owing on credit cards Real estate (primary residence) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

Ranjif 700,000

Basic Assets & Liabilities now Bank & credit union accounts Money owing on credit cards Real Estate (Matrimonial Home)

Joint 1,500,000

Sara


Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities Superannuation Superannuation at the time of marriage Superannuation now

Ranjif 25,000 70,000

Sara 5,000 20,000

Non-basic Assets & Liabilities at the time of marriage Investment property (excluding primary residence) Outstanding mortgage Share & cash investments Outstanding investment loans Businesses Outstanding business loans Farms Outstanding Mortgage Inheritances

Ranjif

Sara

Non-basic Assets & Liabilities now Real estate Outstanding mortgage Share & cash investments Outstanding investment loans Businesses where the person is the sole proprietor Outstanding business loans Farms Outstanding Mortgage Inheritances

Ranjif

Sara

Summary

Ranjif

Sara

Basic net assets at the time of marriage Basic net assets now

700,000 750,000

Non-basic net assets at the time of marriage Non-basic net assets now

0 0

Superannuation at the time of marriage Superannuation now

25,000 70,000

5,000 20,000

Estimated division of net assets $ value of assets

58% 928,500

42% 661,500

Results

1,590,000 Discussion

0 750,000 0 0


Sara’s non-financial contribution during the course of the marriage is recognised under the Family Law Act. The Court should also recognise that Ranjif has made a large contribution to the purchase of their house and given them a certain standard of living. The balance of these contributions is likely to result in an initial split in favour of Ranjif in the region of 70:30. However the Court will then consider the section 75(2) factors. The children will live with Sara and she will be able to earn a limited income doing a part-time job. She does not have the earning potential of her husband and is the primary carer for the children. She made certain career sacrifices to look after the children and her skills are out of date. A consideration of these factors is likely to cause a percentage shift in her favour of some 10-15%.


DETAILED CASE STUDY 4

• • • • • •

• • •

John and Deborah have been married for 10 years. They have a son aged 6. At the start of the marriage John worked as an IT Consultant and Deborah worked as a nurse. They purchased a home with a deposit provided by John and he paid for the home loan whilst Deborah paid for the household bills. Deborah gave up work when their son was born. She met a contact at a mother and baby group which led to her setting up a business exporting Australian-made health and beauty products. The business really took off and she began to devote more and more time to the business. John started to work part time from home to help look after their son. They have now filed a joint application for divorce. Their main basic asset is the family home now valued at $750,000 with a home loan of $350,000. Deborah’s business is valued at $1,000,000.

To assist Tom in estimating what the Court might consider a fair division of property given their history and circumstances, he creates a list of the most important information and figures that the Court will take into consideration: General Information Date married Date separated Age of child 1 if under 18 years Age of child 2 if under 18 years Age of child 3 if under 18 years Age of child 4 if under 18 years

1/6/1994 1/10/2004 6

10.3 years

Personal details Who was the primary carer during the marriage? Who worked full time during the marriage? Who decided to separate? Who is currently living in the family home? Who will be the PRIMARY carer after separation?

John Yes Yes Yes

Deborah Yes Yes Yes Yes Yes

Basic Assets & Liabilities at the time of marriage Bank & credit union accounts Money owing on credit cards Real estate (primary residence) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

John

Deborah 50,000


Basic Assets & Liabilities now Bank & credit union accounts Money owing on credit cards Real Estate (Matrimonial Home) Outstanding mortgage Total market value of cars Outstanding car loans / leases Furniture & other assets Other liabilities

Joint 750,000 350,000

Superannuation Superannuation at the time of marriage Superannuation now

John Deborah 10,000 5,000 25,000 30,000

Non-basic Assets & Liabilities at the time of marriage Investment property (excluding primary residence) Outstanding mortgage Share & cash investments Outstanding investment loans Businesses Outstanding business loans Farms Outstanding Mortgage Inheritances

John

Deborah

Non-basic Assets & Liabilities now Real estate Outstanding mortgage Share & cash investments Outstanding investment loans Businesses where the person is the sole proprietor Outstanding business loans Farms Outstanding Mortgage Inheritances

John

Deborah

1,000,000

Results Summary

John

Basic net assets at the time of marriage Basic net assets now

50,000 200,000

0 200,000

0 0

0 1,000,000

10,000 25,000

5,000 30,000

35% 507,000

65% 948,000

Non-basic net assets at the time of marriage Non-basic net assets now Superannuation at the time of marriage Superannuation now Estimated division of net assets $ value of assets

Deborah

1,455,000


Discussion Basic Assets This is an example of the more traditional roles in a marriage being reversed. The same basic principles will however apply. The starting point will be the parties’ respective contributions to the asset pool of the marriage. The main basic asset is the family home with an equity of $400,000. The main non-basic asset is Deborah’s business valued at $1,000,000. In terms of their respective contributions to the basic assets, John provided the deposit and made the home loan payments at the start of the marriage. Initially Deborah gave up her career to look after their child and run the home. However their roles reversed and John began to sacrifice his career as Deborah’s business took off. John has made a larger contribution to the accumulation of their basic assets. His percentage share will be further increased because his future earnings are reduced as a result of his career sacrifice and he continues to be the primary care for their child. As a result of these factors, he is likely to be entitled to at least a two thirds share of the basic assets. Non-Basic Assets In practice, the division of the non-basic assets is treated differently. Deborah has used her unique skills and ideas to develop the business and make it a success but arguably she has been able to devote time to this because of the fact that John was prepared to provide the support at home and play a bigger role in child care. Statistics would suggest that a Court would award John with a fifth share of these assets as he would be assessed as having made a lesser contribution.

Property settlement agreement Australia  

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