Divorce – Property Division


When a couple decides to separate, decisions of course must be made about the division or disposal of assets and liabilities. For some, the stakes and/or the emotions run so hot and high that nothing can be resolved without the assistance of Lawyers and Courts. For others, the mutual desire to keep things dignified and amicable can mean that they are able to work out how the division should be done without the need to consult a Lawyer at all. For the couples who are able to separate cooperatively therefore, the question begs, do we need to have anything documented at all and if so what are the options?

Generally, there are at least four reasons why formal Family Law documentation should be prepared and as for the documentation options, there are three choices to consider:

  • Reason #1 – No come back – Once proper Family Law documents are prepared and executed, each spouse is free to go off and live their life (make or break their fortune etc) without the need to be constantly looking over their shoulder in fear that their former partner might change their mind and start the legal processes for a re-division of the assets on more advantageous terms.
  • Reason #2 – Enforceability With proper documentation, both spouses are locked into the deal meaning neither can subsequently refuse to carry through with the required transactions (sale of the home, payment of money etc) nor suddenly introduce additional demands (more money etc) in return for their continued cooperation to carry out the terms of the deal.
  • Reason #3 – Stamp Duty Exemptions and Capital Gains Tax (CGT) Rollover – If the family home or an investment property is to be transferred into one spouse’s name alone, that transfer is stamp duty free (saving $000’s) if it is done pursuant to a recognised Family Law Agreement. CGT is not charged on the transfer/sale of personal residences but for investment properties, even a transfer between the spouses will trigger an immediate obligation for payment of CGT (which can run to $000’s) if there is no recognised Family Law Agreement in place*.
  • Reason #4 – Superannuation SplitsIf the deal involves one spouse transferring part of their personal accumulated superannuation account to the other spouse, that transfer can only happen if authorised by proper Family Law documentation.

*Importantly though, the tax liability carries forward with the property (it is not zeroed out) and consequently will still be payable if/when that property is subsequently sold at any time in the future.

When it comes to documenting a Family Law property settlement deal, there are three choices:

  • Choice #1 – Family Court Consent Order – Using a specialised application form, the two parties can write down the terms of their deal into a document expressed to be a “Consent Order” and then place it before the Court for approval. The Court will not automatically approve the deal unless convinced that the settlement is roughly in line with what the Court would have ordered anyway.  A “Solicitor sign off” on the documents is not mandatory, but without it, the Court itself will take a much closer look at the matter and is more prone to reject or requisition the Orders if it finds irregularities or cause for concern.  The time frame of obtaining the Court’s approval does vary, but generally the Orders are returned with Court approval within 2 – 4 weeks.
  • Choice #2 – Binding Financial Agreement (BFA) – Unlike Consent Orders, BFA’s are not filed in or approved by the Courts and therefore they do allow scope for the parties to be more flexible with the deal they wish to strike and how it is to be carried out. In a default scenario, the BFA can be registered in the Court which upgrades the terms to the equivalent of Court Orders, but the Courts cannot be forced to enforce the Orders if the Court doesn’t like the BFA’s terms. When the BFA has been properly thought out and drafted, the risk of non-enforcement is slight to non-existent, but nonetheless for this reason some Lawyers do refuse to use them. Two big advantages with BFA’s are cost and speed. Generally, BFA’s are around 30%- 50% cheaper to prepare than Consent Orders and are binding/active as soon as they are signed compared to the 2 – 4 week waiting time required for Consent Orders. With BFA’s however, a Solicitor’s sign off (that is an independent Solicitor for each of the parties) is mandatory, such that the Agreement is completely unenforceable and invalid if this is not done.
  • Choice #3 – Divorce and wait – Under Section 44 of the Family Law Act, upon the expiration of one (1) year from the date of a divorce (for married couples) or the expiration of two (2) years from date of separation (for de facto couples) the power given to Family Court Judges to deal with a Family Law dispute is extinguished. Accordingly, if the assets are already divided or the parties are very confident they can do so voluntarily without having to rely on an Order/BFA for enforcement, the parties can simply leave the assets where they stand, or carry out the transactions and then apply for the divorce/wait out the 2 years after which time ownership of the assets will effectively stand where they fall. This option however will not carry the CGT rollover relief which is available under a BFA  or a Consent Order. Stamp duty exemptions can still be claimed for married couples if the property transfer is delayed until a Divorce Order is obtained or at least applied for, but this is not available for defacto couples. A further risk/problem with this strategy is that the extinguishment of the Family Court’s power mentioned above is not absolute. Even after the 1-2 year period has expired, either party can apply to the Family Court for permission to commence proceedings out of time and, in appropriate cases that permission will be given.

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.