Tribe's Guide to

How property settlement works

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Contents

Chapter 1 Family law property settlement FAQs
Chapter 2 How is property settlement determined?
Chapter 3 How to make a property settlement
Chapter 4 Special issues

Introduction

The importance of a formal property settlement at the end of a relationship is under-appreciated in the Australian community. Many people drift from the end of long-term relationship into separate lives with only a vague plan for dividing assets and responsibility for liabilities, with no real appreciation of the risk they carry forward or of missed opportunities for income support.

Total financial separation by a formal property settlement agreement is a vitally important part of bringing finality to the relationship of two people and optimising future lifestyle sustainability for all involved–even if the asset pool is small, or if there is a relatively short marriage. This is the case even if the couple have kept their finances and property relatively separate in the course of the relationship, and even if they have an informal agreement about how the assets and liabilities at the time of separation should be dealt with.

In this Guide, we talk about how property settlement works to bring about true financial separation and why this is so important.

Most people also want to know about how to calculate a property settlement. We talk about how you can use the law to work out how to construct the pool of assets and liabilities to be distributed, and how you might estimate your share.

We discuss the mechanics of property settlement and describe how to do a property settlement yourself.

This Guide deals principally with the process of making a property settlement agreement. For more detailed discussion of the process of applying to the court for orders in a property settlement dispute, see Tribe’s Guide to Going to Family Court as a Self-represented Litigant.

Chapter 1

Family law property settlement FAQs

What is a property settlement?

A formal property settlement occurs when a family court makes orders that divide and finalise legal interests in property between people who are or have been married or have been de facto partners.

Most property settlements are agreed between the partners, with the agreement then submitted to the court as an application for ‘consent orders’. Other property settlements go into court as disputes. In both cases, when the court makes the orders, the property settlement is final.

A ‘binding financial agreement’ – often referred to as a ‘pre-nup’ or a ‘post-nup’ — is an alternative way of finalising relations between the partners, often used for second or late marriages. This is a private formal agreement, but it is not the same as a property settlement.

When you separate you can simply divide up your possessions and move on. Lots of people do this. But this is not a property settlement. Despite the best intentions of the parties, legally binding financial obligations between former partners can stretch on for years into the future. This can include liability for debt and for income support.

There are so many possible developments that you cannot predict. You might receive an inheritance. Two years after you separate, your partner might become disabled and unable to support themselves. In these and many other situations, your separation will not keep you and your partner financially apart. But a formal property settlement will do this.

It does not have to be complex. But the fact remains: if you don’t draw a legal line under your financial relations after separation, you have significant financial exposure well into the future.

Talk to Tribe about getting professional advice about your entitlements in a property settlement, about to make a property agreement, referred to as a Terms of Settlement, to have your application for property consent orders professionally drafted, about making your own application for property settlement consent orders or for coaching on how to negotiate your property settlement.

Time frames for property settlement

There are time frames for property settlement that are crucial to keep in mind. These restrictions apply whether you want to make an agreed property settlement or if you can’t agree and need to take the case to court.

Take care: time passes quickly after separation and circumstances for one or both partners can change rapidly.

How long do I have to get a property settlement?

You have only 12 months after a divorce, or two years after a de facto separation, to apply to the family court for a property settlement without needing its special permission.

If you can demonstrate hardship, or other special circumstances, you may be able to obtain this permission.

Can I get a property settlement between separation and divorce?

Yes. You can make a property settlement any time after separation.

Can I divorce before a property settlement?

Yes. Divorce and property settlement are two separate processes under Australian family law.

Can you do a property settlement yourself?

Yes. There is no requirement for you to have a lawyer to represent you in a property settlement. But the legal and financial processes can be complex. Depending on the nature of the assets and liabilities in the relationship, you will need legal and possibly also financial advice to start and finish a property settlement. This does not necessarily mean, however, that you need to pay a lawyer to manage the whole process.

Options for formalising a property settlement

You can make a property settlement by:

  • Applying for consent orders
  • Applying to the court to decide a disputed property settlement (litigation)
  • Going to arbitration. Arbitration is a cheaper (although strictly not cheap!) and quicker alternative to litigation. The decision of the qualified arbitrator is legally binding.

What is a binding financial agreement?

A binding financial agreement (BFA) is not formal a family law property settlement, but it may be an alternative to one. A BFA is also be known as a pre-nuptial, post-nuptial or cohabitation agreement.

The law allows parties to a marriage to make a legally enforceable agreement about how property will be distributed at relationship breakdown that is outside the application of the standard family law process for deciding a property settlement. There are strict formal requirements for making a BFA.

Once you are a party to a BFA, you cannot apply for a property settlement under the Family Law Act unless you can demonstrate that there are grounds that invalidate the binding financial agreement.

Tribe can help you with legal advice, negotiation coaching and various types of documentation in arranging your own property settlement.

Chapter 2

How is property settlement determined?

Guidelines for calculating a property settlement

The process for property settlement in the Family Law Act has been drafted to guide the court, rather than the people involved, about how property settlement orders should be made. But the court’s process provides a useful framework for negotiation and agreement, even if you aim to make a property settlement without court action. Both parties need to have a clear sense of the range of results the law would give them if they can’t reach agreement and need to go to court.

You can use the process set out below to get rough idea of what your property settlement entitlements might be.

How the court decides a property settlement.

The family courts use a staged process to help determine what is a ‘just and equitable’ settlement.

In summary, the Four-Step Process, as it known, involves:

  • A threshold test
  • Step 1: identify the pool of assets and liabilities to be distributed
  • Step 2: assess the contribution of the parties to the property of the relationship
  • Step 3: assess the future needs and resources of the parties
  • Step 4: final test of fairness

Threshold test

A formal property settlement has the effect of changing ownership in property. There are some–though relatively rare–circumstances in which it would not be ‘just and equitable’ that any change to property interests should be made at all. If this is the case, an application for property settlement will be refused. This has occurred in cases where the property pool was extremely small, and where there has been a very long period of separation.

How the Four Step Process for property settlement works?

When applying the Four Step Process in a property case, a court will identify and value the property pool of the relationship (Step 1), then assess a split on the basis of ‘contributions’ (Step 2), adjust it for future needs and resources (Step 3), and do a final overall check to see that the Process has resulted in an outcome that, considering the circumstances of the parties, is ‘just and equitable’.

Separating partners can usefully use this process to negotiate their own property settlements.

Step 1: Identify the pool

The first step in making a property settlement is to identify all the assets and liabilities in the property pool that will be distributed between the partners.

What assets are considered in a family law property settlement?

The group of assets and liabilities eligible for distribution in a property settlement are referred to as ‘the global pool’ or ‘the property pool’.

Property eligible for inclusion in the property pool is, simply, all the property of both parties. It includes property held in joint and in separate names, and property under the control, or for the benefit of, one or both parties. The settlement also takes account of the parties’ liabilities (debts).

Everything in the property pool is assigned a dollar value (liabilities take a negative value).

You reach the total value of the pool by adding and subtracting the values of the assets and liabilities.

People often expect that certain of their assets – say, a business or an inherited item – will be quarantined from inclusion. This is incorrect – all the property, financial resources and financial obligations of both parties are on the table, though certain assets and liabilities may be treated in different ways. These include:

  • property owned by the parties when they married or commenced their de facto relationship
  • inheritances
  • property obtained by a party during the relationship
  • property obtained by a party after separation
  • assets and goodwill in a business
  • superannuation
  • compensation and damages awards paid during the relationship
  • lottery winnings
  • redundancy payouts
  • loans
  • credit card debt
  • tax and other debts owed
  • mortgages and other securities
  • certain life insurance policies.

What effect does the date of separation have on property rights?

Separation does not end a former partner’s rights in the property pool or to financial support from the other former partner. Property rights become final and certain only by a binding financial agreement, or a formal property settlement.

Even the expiry of the deadline for applying for a property settlement does not end rights, as the court may give permission for a former partner to make a late application.

Are business assets included in a family law property settlement?

Yes. Assets in a business, including tools of trade, vehicles and other assets including goodwill) can be considered for distribution in a property settlement under the Family Law Act. A special method of valuation is used, which considers the value to the owner if they retained (rather than sold) the business.

If the business is not fully controlled by a party to the relationship, the proportion they do control is eligible for inclusion in the property pool.

Are trust assets included in a family law property settlement?

It depends on the nature of the trust. There are a number of types in use in Australia. The assets of a discretionary trust – the usual form of a family trust – are eligible property in a family law case if a party to the relationship has effective control.

How is debt treated in a family law property settlement?

Debt is treated like property in a family law property settlement: the court can make orders will have the effect of changed responsibility for debts.

When is a loan considered a gift?

If there is evidence that a loan from one partner’s parents was intended to be repaid, the court will treat it like any other liability. Often, however, it is not clear that the parents intended the money to be repaid, in which case it will be treated as a gift rather than a debt item in the property pool.

Even if the money was a gift, the question may arise whether the parents intended the gift for their offspring only or as a gift to both partners.

Gambling debts and divorce

Particularly if gambling debts have been a major issue in a relationship, and the amount lost can be valued, family courts may treat the losses as an early payout to the gambler and deduct that amount from their property settlement share. Or it may be more generally considered as a ‘negative contribution’ by the gambler in Step 2 of the Four Step Process.

What happens when property changes value after separation?

All of property of the parties at the time the court is considering the application for property settlement becomes part of the property pool at the value it then holds.

After this, however, there may be different treatment of the asset in the Four Step Process, depending on when the asset or its value was acquired. The date of separation is relevant here. The court will be interested in the contributions each party made to the value of the asset in the course of the relationship and the needs and resources of the parties heading into the future.

How are inheritances treated in family law?

The treatment of inheritance money in family law depends on a range of factors and specifically on the timing: whether they have been received a long or a short time before separation, or after separation.

Hidden assets in a divorce: are they discoverable?

Hiding assets in a property settlement process is illegal. Each party is required to make ‘full disclosure’ of their property and financial circumstances. If one party hides an asset it may be impossible to discover the exact nature and value of property. However, if the mere existence of the property can be proved, a value may be inferred by the court and added back to the property pool as a ‘notional asset’.

How are redundancy and workers compensation payments counted in a property settlement?

It depends on the timing of the payment. If the payment occurred in the course of the relationship, it may form part of the property pool of the relationship but may be treated as a contribution of one party. Future payments, if their value is certain, and will certainly be made, may be treated as a future financial resource of one partner at Step 3 of the Four Step Process in assessing the property settlement.

Step 2: Assess the former partners’ contributions

After the assets and liabilities in the property pool have been identified and valued, the court assesses each party’s contributions to the relationship – both financial and non-financial. A preliminary division of the property pool is then made.

How are contributions assessed in a family law property settlement?

The family court considers financial and non-financial contributions to the assets of the family as well as contributions to family welfare, such as being a homemaker or carer for children.

Are contributions always split at 50-50?

In a longer marriage the preliminary split of assets at Step 2 often results in a 50-50 division. This has been interpreted as a presumption of equality, but the courts have stressed that there is no starting point of 50-50. There are many situations in which individual circumstances skew the assessment of contribution towards one party or another. It is merely the case that, in most longer marriages, the partnership tends towards equality of contributions in all the different aspects of making a family life go around.

The courts have been clear that they will not value money-making contributions over contributions to home and family.

How to calculate contributions in a family law property settlement?

You should try to offset categories of contribution from each partner in general, rather than in dollar terms.

It is about the overall weight or balance of factors that matters in the end. It is impossible to quantify family-oriented contributions in any case.

The family law property settlement process is undeniably imprecise, and even, in court based on the discretion of individual judges, which can vary widely. There is a huge range of potential outcomes: even very experienced family lawyers will not guarantee an outcome within a wide range of percentages.

The uncertainty inherent in the litigated process suggests the wisdom of early agreed property settlement if this is at all possible.

How is the contributions step applied to the assets?

The court may decide to apply the contributions assessment asset-by-asset or by a global approach (meaning, to all the assets at once).

Sometimes, and particularly if superannuation is involved, the court may apply a two-pool approach. In this case, the contributions assessment will be performed separately on each of the two pools.

The global approach is generally preferred.

Property brought in at the start of the relationship: the erosion principle

The treatment of property brought into the relationship (‘initial contributions’) is a great challenge for Australian family law.

Unless a relationship is very short, there is little chance that the value of the initial contribution will be returned to the contributing party on a dollar-for-dollar basis.

The initial contribution is considered in the light of its impact on the assets of the parties—if, say, it enabled the parties to place a deposit on their first family home. Initial contributions can have significant weight in the contributions assessment.

Depending on the circumstances overall, however the impact of an initial contribution is said to ‘erode’ as the length of a marriage increases.

What are ‘non-financial contributions’ to the property of the relationship?

Any type of non-financial contribution to the property may be relevant.

Wendy Whitely was able to argue in her family law case that her ‘artistic inspiration’ to her husband, (Australian painter) Brett Whitely, was a substantial non-financial contribution to their property.

The labour devoted by one party to genuine home improvement may be counted as a non-financial contribution.

Home-improvement labour given by a parent of one of the partners might also be counted as a non-financial contribution of that partner.

Contributions as a homemaker or parent

Contributions to the welfare of the family by homemaking or parental care are strongly valued in the court’s assessment of contributions to the property of the marriage.

Homemaking refers not only to cleaning and cooking but also to maintenance, garden work, administrative or financial duties relating to children or the household.

In assessing the contribution, the court will look at the domestic work performed by the parties, and how much time this took. The existence of paid external domestic help can impact on this assessment.

The quality of the homemaking or parenting may be relevant also.

How are significant financial contributions after separation counted in a property settlement?

The practice of equating financial and homemaker contributions starts to break down for property acquired near, or after, separation, when the underlying partnership can no longer be said to exist. An inheritance acquired very late in a relationship, or after separation, is likely to be treated as an entitlement of the party who received it, subject to considerations at Step 3 of the Four Step Process.

The effect of waste, addiction and domestic violence on family law property settlement

Since the initial abolition of fault as a basis for divorce in Australia in 1975, the issue of a partner’s ‘bad’ behaviour is returning to legal focus. Poor behaviour—such as by wasting assets, addictive behaviour or domestic violence–can be factored into the calculation of a property settlement as a ‘negative contribution’ at Step 2 of the Four Step Process. This is not because the behaviour is morally or legally wrong, but because it reduces the other partner’s capacity to make a full contribution on their own account.

Step 3: Consider future needs and resources

After the court makes an initial split of assets on the basis of past contributions, it then reviews another set of factors – this time pointing to the future – to decide whether further adjustments should be made in consideration of the differing future economic needs and resources of the parties.

What future financial needs and resources are relevant?

The court can consider any factor relevant to the particular circumstances of the couple, but the law invites it to specifically consider:

  • their age and health
  • their income, property, financial resources and capacity to work
  • the care of a child of the relationship (including residential arrangements)
  • their ability to support themselves and anyone else they have a duty or responsibility to support
  • pension or superannuation entitlements
  • a reasonable standard of living
  • the length of the relationship
  • the effect of the relationship on earning capacity
  • financial circumstances arising from a new relationship
  • child support entitlements/responsibilities

This list may help couples negotiating their own private agreements consider how the arrangement of these types of circumstances, going into the future, might impact on their outcomes from the separation, and make some provision in the property settlement accordingly.

How do future needs and resource affect a property settlement?

Unlike the contributions factors at Step 2, which may be assessed one by one, the future needs and resources factors are almost always assessed as a group.

The result is then applied as a percentage adjustment to the Step 2 split.

The task is to try to form a picture of each former partner’s long-term financial position, and then to adjust the settlement, as it been assessed at Step 2, to provide for any significant difference in the partner’s prospects.

You should examine each of the factors and try to foresee how a court might build a picture of the likely differences in your future financial circumstances. And then do the same for your former partner.

Yes, this is an exercise in crystal ball-gazing, and necessarily inexact. Even in court, a wide range of possible decisions at this Step are possible.

Adjustments are usually made on a percentage basis (although if a property pool is small, future requirements may be estimated in dollar terms).

The old range for adjustment at Step 3 used to be in the 5–10 per cent range. This range will continue to be appropriate for parties with similar likely income trajectories. The courts, however, are making a point, in recent times, of recognising likely difference in future outcomes. The 10–20 per cent adjustment range now being common. A 25% or more adjustment for needs and resources might be awarded, say, to a primary carer of four children.

Step 4: Check for fairness

The law says that after a court assesses the property pool, splits it on the basis of contributions and then adjusts it for future needs and resources, there should be final step overall check to see that the application of the Four Step Process has resulted in an outcome that, considering the specific circumstances of the parties, is ‘just and equitable’.

For example, if the application of the previous three steps results in one former partner holding all their entitlements in the form of superannuation, which they would not receive for a very long time, this arrangement might fail the Step 4 check.

Chapter 3

How to make a property settlement

Should we use the Four Step Process in negotiating a property settlement?

The Four Step process is set out in family law to guide the court, rather than private individuals, in the deciding a property settlement.

But yes, you can and probably should use the Process in your own analysis and negotiation on a property settlement. The method is designed to result in a fair distribution of assets. It also helps you to keep in view the likely result in court if negotiations fail.

On the other hand, there are no particular rules to private negotiation other than the ones you agree on with the other party. If you agree to discard a principle observed in the Four Step Process (for example, by excluding superannuation altogether from the asset list)–that is your decision and is not illegal. Just remember that the principle will come back into play if you can’t agree, and you end up in court.

Talk to Tribe about coaching on how to negotiate your property settlement.

Do we need to make a formal family law property settlement?

Many couples make their own arrangements for dividing their property. They agree on values, agree on the split, distribute the assets, alter title and account names, and move on. This is much more likely to happen if the property pool is small.

But this is not a very good idea.

Yes, an informal property settlement is much cheaper, quicker to finalise, and less stressful for the parties.

But they are not final. A party who becomes dissatisfied with a private agreement can apply to the court for orders altering the entire arrangement as much as 12 months after a divorce, or two years after the end of a de facto relationship. Even later applications are a strong possibility if hardship can be shown.

If the other party does decide to go to court, the time frame opens up even further.

The relevant point for valuations of property holdings is the date of the hearing of the application.

On the present state of the family court lists, this date will be more than three years after the date of application. If, say, a couple separated in 2020, divorced in 2022 and then and one member of the couple received permission, because of hardship, to apply 2 years ‘out-of-time’ for a court-ordered settlement in 2025, the relevant date for application of the Four Step Process would be no earlier than in 2028.

Consider how much change there will be before 2028 in the property holdings and financial needs and resources of you and your former partner, and other life circumstances. Think about possible future family obligations, gambling, accidents, new debts, sickness, addiction, poverty, inheritances mental incapacity, capital gain, new businesses… All these factors are relevant in the future application of the Four Step Process.

There may also be significant additional cost to the parties, as the loss of capital gains tax and stamp duty concessions that are available to parties who file consent orders, or get a court-ordered property settlement, or make a binding financial agreement. These may not be available to couples who settle privately and informally.

Time limit for property settlement applications

Bear in mind that if you wish to apply for orders for property settlement from a court, whether this is by consent or if the couple is in dispute, the application should be filed within one year from the date that the divorce came into effect unless both parties agree in writing otherwise or the special permission of the court is obtained. The permission of the court to file an application outside the one-year period will not be granted unless there would be hardship for a partner or a child of the parties if it wasn’t.

Can we do our own property settlement?

There may be complex elements, but it is entirely possible, and frequently done, that a couple works through the entire Four Step Process together to emerge with a fair settlement agreement, which they then make sustainable in the longer term by applying to court for property settlement orders ‘by consent’.

It may be important that you receive legal and financial advice to make sure that the agreement that you make is fair and appropriate in your circumstances.

There are books, mediators, accountants, financial advisers, court staff, friends and relatives who can assist you from one end of the property settlement process to the other.

It is vitally important, though, that even if you will not be giving your property settlement to a lawyer to manage, that you take legal about your entitlements under family law, in a property settlement. This can help frame your negotiations and help you decide when to settle (agree) in negotiations.

Talk to Tribe about getting professional advice about your entitlements in a property settlement, about to make a property agreement, referred to as a Terms of Settlement, to have your application for property consent orders professionally drafted, about making your own application for property settlement consent orders or for coaching on how to negotiate your property settlement. Tribe has also developed its own Build-your Own Family Property Pool Tool for the use of its clients to simplify the process of identifying and thinking about dividing your family property.

What is ‘disclosure’? Why does disclosure matter?

Full disclosure is the first important process in the property settlement process. Whether the parties are negotiating privately or with the assistance of mediators, lawyers or financial people, there can be no meaningful progress unless both former partners make ‘full and frank disclosure’ to each other of the details of their financial affairs, including:

  • their earnings and other financial resources
  • their property interests
  • income earned or property held by a business that is owned or controlled by them
  • any trust in which they have a significant role
  • any sale or disposal of property, or use of funds, since separation, or within 12 months before separation; and
  • all debts and continuing liabilities, like monthly payments on credit cards.

Disclosure means not only telling the other person but providing them with documentary proof of all of the relevant accounts and valuations.

Quick-and-the-dead summary of how to make a family law property settlement

  • Make lists about your financial and property affairs.
  • Gather documentation
  • Disclose details of your assets and liabilities and financial resources
  • Get advice about your legal entitlements if you had to go to court.
  • Agree what is in the pool of assets and liabilities.
  • Agree the values of each of the assets and liabilities (or how you are going to value them)
  • Apply the Four Step Process, negotiating and agreeing a value split.
  • Package the assets and liabilities to make-up the agreed shares
  • Formalise the agreement in a ‘terms of settlement’ document: sign and date
  • Prepare, sign and file a consent order application (with the terms of settlement)
  • Await the receipt of the consent orders from the court
  • Implement the orders

Different approaches to distribution

Meaningful negotiation can take place only after both parties have disclosed all relevant information in their possession, and jointly identified a global pool of assets and liabilities. From this point, you can try to allocate the assets, or a portion of each, one at a time. This is called the asset-by-asset approach and is best attempted only if the property pool is small or simple.

The second method is the global approach, where the couple agrees on a single, central pool of assets and liabilities, calculates its value, then negotiates and finally distributes on the basis of percentages. This is called the global pool approach.

A third, the two-pool approach, applies when the couple needs a different approach to division for the one or more specific assets- say, for superannuation or for an inheritance received late in the relationship.

Valuing the assets and liabilities in family law property pool

Property negotiations may be difficult and extended if you cannot agree on the value of the assets in the pool. It is worth the effort involved in agreeing on values for assets and liabilities before you begin to negotiate the allocation of items or percentages.

But discussion can fall apart at this very early stage. Lots of couples struggle to agree values. If this is happening for you, try to shift the discussion to negotiation about what method you will use to decide the value.

Selling the asset in an agreed timeframe is one way of determining market value. Some people agree, for example, that they will split the proceeds from auctioning a property, whatever that may turn out to be, in certain percentages. If there is a certain dollar-value threshold that is vital to the sustainability of the settlement (from your point of view), it may be unwise to commit to a percentage-based settlement.

How to measure market value

If you are looking for a yardstick for making a valuation, try ‘fair market value’ which is usually what the courts use.

Fair market value is the price that a willing but not desperate buyer, with adequate information about the asset, would pay to a willing but not desperate seller.

Valuing a company in a family law settlement

Although family companies are often valued on the basis of dividends, they may also be assessed on the basis of revenue, or capital, or garage-sale value, depending on which method appears likely to yield the most realistic result in the circumstances.

Valuation of a business, trust or corporate structure should be referred (by the parties jointly, if possible) to an actuary, accountant, solicitor or other professional adviser.

A very important step: how to document your property settlement agreement

After you apply the Four Step Process, or perhaps an alternative method in your negotiations, and come up with an agreement for the distribution of the property of your relationship, there will be a property pool of certain value, and an agreed split of the value between you.

The next set of decisions is about which assets and liabilities will go to which party in what proportions to make up the respective shares of value agreed.

The agreed split should be itemised in the form two lists of whole assets and liabilities, and portions of assets and liabilities, that have been allocated to each party under the agreement to make up the shares.

You must then consider what needs to be done, in legal terms, to change the current ownership of or responsibility for each of those assets and liabilities to reflect your new agreement. You need a set of action items.

For example, if there is a sum of money in one person’s account that will be split, the action item there will be ‘a. Person A will transfer $x to account number x8887 in the name of Person B before [date]’.

If a property is to be sold and the proceeds split, the steps about how and when and at what price you agree to put the property on the market, how the agent will be chosen, and what will happen with the proceeds of sale should be discussed, agreed and written down.

Consider each asset or liability type one at a time and work out the easiest way to give effect to the agreed split for that asset or liability. Write all the steps down.

You can deal with assets and liabilities in a group as long as the whole group receives the same treatment.

Make sure you clearly define, in writing, the identity of the assets and liabilities you are referring to for each distribution ‘treatment’.

Make sure you state who is going to take each action and when.

The numbered written statement of all the action needed to distribute all of the assets or liabilities in the property pool is called the ‘terms of settlement’ or ‘minutes of consent orders’. These are the agreed terms of your property settlement. You will be asking the court to convert them into ‘consent orders’.

Consent orders make the property settlement reached between the parties legally enforceable and final.

Consent orders about property division may be negotiated and filed with the court after the couple reaches agreement. This mostly happens before a court case is started. But consent orders can also be made after a case is started, if the parties come to an agreement to settle the property dispute.

Before applying for consent orders you must come to agreement and complete a ‘terms of settlement’ (or ‘minutes of consent orders’) document, which describes the set of action steps that you both have agreed will occur to give effect to your agreement. This document should be signed and dated by both members of the couple as soon as it is agreed.

That document, then, is filed with an ‘application for consent orders’ in the Family Court of Australia.

The application is reviewed by the court (without a face-to-face hearing) and if, after review, the court decides the arrangements are appropriate, it will issue the list of arrangements specified in the terms of settlement in the form of ‘consent orders’.

This means that the arrangements you agreed and signed-off on in the terms of settlement, now have authority as orders of the court.

Talk to Tribe about having your application for property consent orders professionally drafted or about making your own application for property settlement consent orders.

What if we can’t agree on a property settlement?

There is an expectation that you have made a genuine effort to try to resolve a property disputes before filing a disputed application for property orders in the family courts.

If you have made this genuine effort and failed to reach agreement, you may decide to make an independent application to the court for property settlement orders.

This Guide deals principally with the process of making a property settlement agreement. For more detailed discussion of the process of applying to the court for orders in a property settlement dispute, see Tribe’s Guide to Going to Family Court as a Self-represented Litigant.

Chapter 4

Special issues

Spouse maintenance: ‘Do I have to support my wife during separation?’

Formerly married and de facto partners who are reasonably able to provide income support to a partner who reasonably needs income support, are likely to be legally liable to pay spouse maintenance.

Child support

Parents are liable to pay expenses associated with the care, welfare and development of their children from the date of their birth. They are liable to pay ‘child support’ from the date of separation. Parents can pay the amount calculated under Australia’s child support scheme, or they can choose to pay more. They have the option of having the money collected and distributed through the child support system, or they can make a ‘child support agreement’ to make payments separately and privately.

The amounts payable under child support law are calculated by a complex set of factors. The Department of Human Services can provide the necessary information about child support assessment. You should enquire about this immediately at separation.

For legal information and guidance on post-separation parenting issues, see Tribe’s Guide to Parenting Agreements.

Selling a property before a divorce settlement

It sometimes happens that one former partner becomes aware that the other is planning to sell or otherwise dispose of property of the relationship before the final property settlement.

There are a number of ways to deal with this including by: applying for an injunction, placing a caveat on the property, or (quickly) negotiating and executing a binding financial agreement or application for consent orders.

How can I get an injunction to stop my spouse selling property?

You can apply for an order from the family court prohibiting your former partner from selling, mortgaging or otherwise dealing with property, shares, companies, trusts and other assets. This type of order is called an ‘injunction’.

You must have an application for a property settlement in court at the time you apply for an injunction. (If a case is not already on foot, you can commence it at the time you apply for the injunction.)

You will be required to provide proof that the disposal of the property would jeopardise your property claim if the injunction wasn’t granted. You will also need evidence of intention to dispose of the asset.

An injunction may be difficult and expensive to obtain.

Caveats

If the property you fear will be sold is real estate forming part of the relationship property pool, you can investigate the possibility of placing a caveat on the title. A caveat prevents the registration of any transactions in relation to the property (such as a transfer of title) that conflict with the interest claimed by the caveator (you). A caveat usually has the effect of preventing sale.

You should be aware that placing a caveat on property is regarded as a hostile act. It may only be temporary because the other party can apply to have it removed if you don’t have caveatable interest. This is an interest arising not just from the importance of the property in your property settlement calculations but arising from the property itself.

A caveat is quick and cheap, however, and can hold up a sale while you take other more sustainable action.

Negotiating a fair and certain outcome from the sale

A person who is selling property they shouldn’t be selling before a divorce settlement may be trying to defraud their former partner, or alternatively, may simply be desperate for funds. If this is the case, and you can negotiate a share of the proceeds of sale that is in line with your expectations from this asset from the property settlement, you may not need any more draconian solution.

The risk with this method is that there is no certainty you will receive the share you negotiate from the sale. Also, you will lose the opportunity to use the weight of that asset in negotiation on the balance of the assets.

The treatment of superannuation in a property settlement

The court must take superannuation into account like any other asset when making property settlement orders. Superannuation is a more complex asset to deal with, however, firstly because, as a future rather than current asset, it is not easy to value; secondly, because of the role of the superannuation trustee who has legal responsibility for the asset until it vests, and thirdly, because of the trickiness of splitting a future asset.

Applying the four-step process to superannuation

The property settlement Four Step Process can be applied to superannuation.

But because of its special characteristics as an asset, superannuation may be assessed not in the same global pool as all the other assets but in a separate pool.

The single, global pool approach might be used only if the amount of the superannuation can be clearly identified, and will be available soon after the property settlement, or if only a small amount is involved.

How the Four Step Process is applied to an independent superannuation pool will depend on the type of interest.

It is likely you will need accounting and legal advice in relation to the treatment of significant superannuation assets in property settlement discussions and processes.

Step 1: Valuation

Superannuation in an accumulation fund will be given the value in the member information statement.

The valuation of superannuation interests in a defined benefit requires application of a complex staged formula.

Step 2: Assessment of contributions

Direct financial contributions to superannuation will obviously be made by or on behalf of the partner who is the member of the fund.

The non-member partner may be able to claim to have made an indirect financial contribution to the superannuation, perhaps by participating in joint investment activities through a self-managed fund or through a salary sacrifice arrangement.

More often, however, non-member spouses claims a non-financial contribution to the superannuation in the form of their contribution to the welfare of the family – that is, their contribution to ‘home affairs’ has allowed the other spouse to go out and not only earn a living but also accrue superannuation as a nest-egg for their joint future.

Step 3: Future needs and resources assessment

A former partner might be assessed as having made no contribution to the other party’s pre-existing superannuation interest but may still be entitled to a share based on Step 3 future needs and resources factors (for example, the care of a child).

Step 4: The fairness check

The court will be concerned to see that the distribution of assets and liabilities is fair overall. This may not be the case if, say, superannuation is the major asset in the property pool and, under the proposed split of assets, one party will realise no benefit from the settlement in the short or medium term.

What superannuation orders do we apply for?

There are two basic types of order you can apply for a court to make to alter interests in superannuation, either in an application for consent orders, or an application for disputed property settlement.

  • Under a splitting order, the trustee of the superannuation fund is ordered to pay a dollar value or a percentage share to the non-member when the superannuation becomes payable.
  • Under a flagging order, the trustee is required to advise the court when the next splittable payment is due but can’t make that payment without another court order. This is the method usually chosen when the superannuation interest can’t be effectively valued until it is about to be released, and when the proposed release is close in time to the property settlement.

How to get information about superannuation

Both the superannuation fund member and their spouse are entitled to be given valuation and other information about a superannuation interest from the trustee of the superannuation fund.

To obtain information about a superannuation entitlement post a completed Family Court Form 6 ‘Declaration to Accompany Application to Trustee’, along with a blank ‘Superannuation Information Form’, to the trustee of the fund. These forms appear together in the Family Court’s Superannuation Information Kit. The trustee will send back the completed Superannuation Information Form stating the type of superannuation interest held by the member, and its value.

To protect the parties’ personal safety, the trustee will not disclose the address of the fund member to the applicant, or the fact that the spouse has applied for this information.

Fairness to the trustee

The trustee of the superannuation fund holds legal title to the superannuation interest for the benefit of the member. The trustee is not bound to do anything with that interest unless they receive ‘procedural fairness’ in the property settlement process.

This means that there are special requirements for advising and inviting the input of the trustee once the applicants have decided/agreed on the property settlement orders they wish to apply for. See the Superannuation Information Kit for more detailed information.

Applying for superannuation orders

If a partner wants to apply for the superannuation orders, the completed Superannuation Information Form must be filed along with the balance of documentation in the application for consent orders (or a disputed initiating application) in the court.

In all cases the applicant should file a separate affidavit detailing their efforts to provide procedural fairness to the trustee, and the trustee’s response.

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We look forward to helping you through with your own property settlement. Tribe’s property settlement services include:

Property Settlement: Legal Advisory Clinic

Property Negotiation Workshop

Terms of Property Settlement: Documentation

Property Settlement Consent Orders Advisory Clinic