How is a property settlement determined?

A common question asked by clients during an initial meeting to discuss their property settlement is "What percentage of the property pool will I receive?" Living through the uncertainty created by separation is difficult so it is not surprising that often, this will be the most important question asked.

There are several factors considered by the court when determining the division of assets. It can be difficult to provide certainty around each party's entitlements as each matter turns on its own particular facts and circumstances. To assess the parties' entitlements and the division of assets, the Federal Circuit and Family Court of Australia adopts a four-step process.

Step 1: Determining the pool of assets, liabilities and financial resources

In the matter of Hickey [2003] FamCA 395, the Court outlined that it is important to "consider the whole of the property of the parties, however and whenever acquired". The Court will usually consider all property in possession at the time of the hearing or settlement, not at the date of separation. Property is defined broadly and essentially comprises everything that the parties may own including real estate, investments, businesses and superannuation.

Step 2: Looking at the contributions made by each party to the acquisition, conservation and improvement of the property pool

Contributions can be direct and indirect, financial and non financial, and may relate to the care and welfare of the family. The Court considers these contributions before, during and after the relationship. A general approach is taken to this assessment. Though there are some exceptions, the Court does not look at the minutiae of the contributions or perform a mathematical assessment of the contributions each party has made.

The general principles applied when assessing contributions include, but are not limited to, the following.

• There is no presumption of equality.
• Contributions are relative to the length of the relationship. A large financial contribution at the beginning of a relationship will often be treated differently in a short relationship when compared to a long relationship.
• Financial contributions of one party will often equal indirect homemaker and parent contributions made by the other in a longer relationship.
• Special factors may arise which mean performing a certain role in the relationship should carry more weight. An example of this is where contributions of one party were made more onerous by the other due to family violence.
• Certain contributions may carry different weight depending on whether they were gained as a windfall, such as an inheritance or lottery win, or earnt through skill and effort.

Step 3: Assessing the future needs of the parties with regard to section 75(2) of the Family Law Act 1975

These include:

• age
• income and earning capacity
• property and resources
• health issues; and/or
• care of children under the age of 18 years

If one party has higher future needs than the other party when comparing these factors, an adjustment may be made in that party's favour.

Step 4: Any Order made must be just and equitable in all the circumstances

In the matter of Tomasetti v Tomasetti [2000] Fam CA 314 at [113] - [114], this concept was explained by the Court that "in this context, the whole is not necessarily the sum of its component parts, and at the very least one has to stand back, at the end, and look at the final result, to ensure that the cumulative process has not produced a manifestly unjust result."

When applying these four steps, the Court considers that each matter turns on its own facts, and there is no obligation on a trial judge to consider comparable cases. This can lead to varied and sometimes conflicting outcomes.

For instance, in the matter of Fields & Smith [2015] FamCAFC 57, the Court originally determined that a 60/40 split of the assets was appropriate but, on appeal, the division was adjusted to a 50/50 split. The matter involved a long marriage of 30 years, where the husband built a successful business, while the wife’s contribution was mainly as a homemaker and parent.

In Marsh & Marsh [2014] FamCAFC 24, the Full Court allowed an appeal by the wife and remitted the matter for re-hearing after the trial judge ordered a 70/30 split of the property pool in the husband's favour. This matter involved a 21-year marriage; the parties had been separated for 10 years and had three children together. The Appeal Court held that the trial judge failed to give account to the wife’s continuing indirect financial contributions as homemaker and parent.

While applying the four-step approach may give an indication of the entitlements of each party, professional legal advice should be sought on each party's entitlements from experienced practitioners who are aware of the nuances of the Court's application of this process.

Lander & Rogers' family lawyers have extensive experience advising individuals on matters relating to dividing property and other assets. Please contact a member of our Family & Relationship Law team if you would like further advice on property settlements and your entitlements.

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