The worst thing about separation and divorce is that your former partner will get half of everything, no matter what, right? Well, no. In Australia there is no right for either spouse to get half of the property or marital assets from the marriage. In this article, we dissect this ‘equal division’ or’50/50’ separation myth and explain the actual rules for property settlement in Australia.
The 50/50 Myth
There are a range of myths about the law in Australia: Many believe that if they are charged with a crime they will have to ‘post bail’ —pay an amount set by the Judge in order to be released while awaiting trial. Or, that on divorce they will have to pay ‘alimony’ for the rest of their life to their ex. As with the 50/50 myth, all these myths are largely the result of media portrayals of foreign law.
For example, there are a minority of states in the United States that have a property division rule with some similarities to the 50/50 myth. In the ‘community property’ states primarily on the Western side of the US (including Arizona, California, Texas, and Washington), the property of spouses is divided into separate property and community property on separation or divorce. Then, in general, property acquired during the marriage in these states is treated as ‘community property’ and is presumed to be equally shared. New Zealand has a similar system, presuming equal division of property.
Keep in mind, however, that in all those foreign cases, there is no automatic rule that marital assets are divided 50/50: There are various exceptions and carve outs which will mean that property is not divided in that way.
The Equitable Division ‘Truth Bomb’
In New South Wales, and generally within Australia, the test is for the ‘just and equitable’ distribution of property, rather than ‘equal’ division. So, practically, how do a couple go about dividing their property? The best approach is for both spouses/former spouses to negotiate between themselves how the property should be divided. Once they have reached agreement, this can be formalised in a binding legal agreement or by seeking consent orders from the court. At the same time, each spouse/former spouse should consider:
- How ongoing care and parenting responsibilities will be arranged. Parenting plans and child support arrangements should be negotiated. These can also be the subject of consent orders from the court. A family lawyer can assist you in the preparation of these orders;
- Related financial settlements, such as whether or not there should be ongoing payments to one of the spouses from the other (known as ‘spousal support’ or ‘maintenance’);
- Any appropriate child support payments.
If both parties cannot come to an agreement, how will property be distributed? In those cases, and where mediation or family dispute resolution has not worked, you will need to apply to the court to make an order for property settlement.
Just and Equitable Division
The test used by the court is set out in section 79(2) of the Family Law Act 1975 (Cth). Under that Act, an order for property settlement requires that the court be satisfied that, in all the circumstances, it is “just and equitable” to make the order.
In making this order, section 69 sets out the matters that the court will consider including:
- The assets and liabilities of each individual and held collectively by the couple;
- Direct financial contributions by each individual;
- Indirect financial contributions made by each individual;
- Non-financial contributions;
- The impact that any proposed order may have on the earning capacity of either individual;
- Various other considerations set out in section 75(2) of the Family Law Act 1975 (Cth), including the age and health of each individual, income and financial resources, childcare responsibilities, and future earning capacity.
What About De Facto Relationships?
Another aspect of Australian family law mythology is the ‘common law’ marriage: A legal marriage that is not governed by legislation and where no formal ceremony occurred. While this exists in other countries, it does not exist in Australia. All marriages in Australia are governed by legislation and require a formal ceremony. Note, however, there is legal recognition of de facto relationships in Australia.
Similar principles for property settlement also apply to de facto couples in Sydney and New South Wales more generally under the Family Law Act 1975 (Cth). It should be noted that this is an area where states differ. In Western Australia, de facto couple property settlement is determined by rules set out in the Family Court Act 1997 (WA).
Does Timing Matter?
The time limit for applying for a property settlement is one year after a final court order for divorce has taken effect. As divorce requires that the couple has been separated for one year before the process is initiated, there is, in essence, two years from the date of separation to finalise your property settlement.
Despite the connection via time limits, it is worth keeping in mind that property settlement and divorce are completely separate legal processes in Australia. To read more about the divorce and separation processes see Separation or Divorce - What You Should and Should Not Do.
On the dissolution of a marriage in Australia, the property of spouses is not automatically split 50/50. The requirement in Australia is for a ‘just and equitable’, rather than an equal division of property. Of course, it may turn out that property is divided 50/50 – but this will be due to an agreement of the spouses or the discretion of the court, not the application of an automatic rule.
Before working through the property settlement process, it is strongly advised that you seek out advice from an experienced family lawyer.