Following the breakdown of a marriage or a defacto marital relationship, the separating couple will obviously need to tackle the task of dividing up their assets. With trust and respect running at an all time low and emotional distress often running at an all time high, reaching agreement on these issues often represents a real struggle. For those who just can’t reach an agreement, the Australian Family Court has the power to adjudicate on the dispute and make Orders to divide up the parties assets in a particular way. This process is called a “Property Settlement” but how is it done?

A property settlement dispute in the Family Court is always worked out according to a 5 step process.

Step1- Is it Just and Equitable:The Court must look at how the assets are currently owned/held and determined if it is fair/or unfair to keep them that way.This condition only becomes controversial in rare circumstances and is usually easily satisfied.

Step2- Value the Asset Pool:Here a Judge works out the value of the assets and liabilities available for division.Some important points to note here on this are:

• Superannuation entitlements are these days treated as a divisible asset.
• Some “annuity” pension entitlements can actually also be valued as being the equivalent to a lump sum capital amount.
• Land and buildings are valued on the basis of what a willing but not anxious buyer would pay a willing but not anxious seller and can be valued by a registered valuer or Real Estate Agent in the event of dispute.
• The value of businesses is usually determined according to what retaining the business is worth to the owner operator spouse and in the event of dispute can be determined by special valuers called Forensic Accountants.
• Furniture is usually valued at garage sale prices.

Traditionally, each spouse was also at this stage given an opportunity to argue for the add back of any asset that was lost or diminished in value due to wasteful behaviour (for example, giving away matrimonial savings after separation to a third party out of spite) by the other spouse.Recent court decisions however, have suggested this process is more appropriately presented as part of Step 3.

Step3 -Assessment of Contributions:Here a Judge looks at both direct and indirect contributions of both a financial and non-financial nature over the entire period of the relationship. Assets contributed by a spouse at the beginning of the relationship or gifted to that spouse through a Will following the death of a relative or from the proceeds of personal injuries claims are all highly relevant and can often significantly impact on the final assessment.At the end of the process, the Judge assesses both spouses’ contributions usually in terms of a percentage against the asset pool determined from step 1, ie: a Judge concludes the proportions to which the husband and wife can be said to have contributed towards the creation of the wealth now available for division between the parties.

Step4- A Judge Looks at Future Financial Needs:Here a Judge is making a qualitative assessment of either the parity or disparity of the Husband’s and Wife’s future financial needs having regard to their respective:

• ages;
• health;
• earning capacity;
• ongoing obligations for the support of any infant children.

If a Judge considers there to be parity between the spouses then a Judge usually will not disturb the percentage division achieved from step 2 however, in the case of disparity then a Judge will usually adjust percentage entitlements up or down depending upon whether one spouse is now considered to be more or less financially needy than the other.

Step5- Justice and Equity:Under this step, a Judge is required to step back from the result achieved from steps 1 to 3 and determine if in his/her assessment, that result does adequate justice and equity between the parties.The application of this factor can be technical but two common applications of this step are:

• making small adjustments to a percentage entitlement up or down so as to make it possible for a spouse (typically the primary care giver parent) to retain a home in which she/he and the children might reside to avoid displacing the children; and/or
• determining the configuration of assets and liabilities to be taken by one spouse or another as their property settlement entitlements, for example, a Judge may conclude that one spouse should retain or receive a much greater share of superannuation dollars as part of their property settlement entitlements so as to deliver to the other spouse a much greater proportion of present day liquidable assets in cases where that spouse is more in need of money now and the other spouse is not.

Once the percentage entitlements are struck, the Court then generally endeavours to give each spouse the opportunity to retain those assets that they seek with either an additional cash payment if those assets total less than that spouse’s percentage entitlement or provision for a cash payment to the other spouse if the assets are more.

If both spouses seek the same asset then the Courts would generally order that the asset be sold with both spouses then at liberty to bid against the open market if they choose.

Michael Zande is a Queensland Law Society accredited family law specialist with over 25 years experience in the field. He is the principal at Zande Law Solicitors, Suite 7, Norwinn Centre, 15 Discovery Drive, North Lakes.To contact Michael for advice phone 3385 0999.

The information in this article is merely a guide and is not a full explanation of the law.This firm cannot take responsibility for any action readers take based on this information.When making decisions that could affect your legal rights, please contact us for professional advice.