A common question from separating couples is how to deal with a division of their assets.
Timing is relatively straightforward.The parties can apply for Court Orders for property settlement at any time after separation. However, the Family Law Act sets out a time restriction of 12 months after divorce (or within 2 years of separation for de facto couples) for the parties to apply for a property settlement.
In some circumstances, an extension of time is available.
The Court decides on property orders in a 4-step process.The steps are:
- Ascertaining as asset pool. All assets must be taken into account whether they are required before or during the relationship or after separation.The definition of property is very wide
and includes almost everything of value, including funds or assets over which a party has influence or control or prospective entitlements.
- Contributions to the net asset pool. An assessment needs to be made of each party’s contribution to the relationship, both financial and non-financial and also as homemaker or parent.
- Future needs. Matters taken into account include age, health, income earning capacity, the property of each party, whether the party has care or support of children, and the financial circumstances of any new relationship.
- Practical effect.The Court will review the result arrived at after the first three steps to consider whether it is just and equitable in all of the circumstances.
In all property settlement matters both parties have a clear obligation to make full and frank disclosure about their respective financial circumstances.
If parties reach agreement between themselves regarding property settlement there are two ways of formalizing that agreement under the Family Law Act, namely by consent orders through the Court or by making a Financial Agreement which is binding under the Family Law Act.
It is very important that one of these two steps are taken to ensure that the agreement reached is binding on both parties, and also to secure stamp duty relief in some circumstances.