When couples separate, one of the most challenging aspects is dividing their assets. Many assume that marital property will automatically be split 50/50, but this isn’t always the case. Under the Family Law Act, property settlements are more complex than dividing everything equally. The family court considers various factors to ensure that the division of assets is fair, but not necessarily equal.
In this blog, we’ll explain why an equal division might not apply in your situation, explore the factors that influence a family law property settlement, and outline how courts determine a fair outcome based on the specific circumstances of each case.
Understanding Property Settlement
Property settlement refers to the division of all assets and liabilities between separating parties. This includes real estate, superannuation, savings, debts, and personal items. A common misconception is that everything is divided equally. However, in family law, the focus is on what is “just and equitable,” rather than strictly equal.
If both parties can agree on how to divide their relationship property, they can formalise the agreement through a legally binding consent order or a binding financial agreement. If no agreement is reached, the family law court may intervene and make a decision based on several factors—such as financial and non-financial contributions—to achieve a fair outcome in the financial settlement process.
The Four-Step Process in Property Settlement
To ensure a fair distribution of marital assets, family law follows a four-step process when determining how property should be divided in a divorce settlement.
- Identify and Value the Property Pool – The first step is to list all assets and liabilities owned by both parties, including real estate, vehicles, superannuation, investments, and debts. Once all assets and liabilities are identified, they are given a current market value, creating a total asset pool that will be divided.
- Assess the Contributions of Each Party – Contributions made by both parties during the relationship are then evaluated. These can be financial—such as income, trust assets, or inheritances—or non-financial, such as homemaking or child-rearing duties. Both types of contributions are given equal weight. For instance, one party may have earned a higher income while the other contributed by managing the household and caring for the children.
- Consider the Future Needs of Both Parties – The court considers the future needs of each party, including their age, health, earning capacity, and responsibility for any children. If one party has a lower earning capacity or will be the primary carer of the children, they may be entitled to a larger share of the property to ensure they are financially secure moving forward. This is particularly relevant in cases involving a de facto relationship or married couple where one party has sacrificed career opportunities.
- Ensure the Division is Just and Equitable – After assessing the contributions and future needs of both parties, the court determines whether the proposed division is fair. This may result in an adjustment to the percentage split to ensure that the outcome is just and equitable for both parties—even if it results in an unequal division of assets.
Why a 50/50 Split May Not Apply
Although many people assume that property will be divided equally, a 50/50 split is not the automatic outcome in family law property settlement cases. Here are several reasons why the court order might deviate from an equal split:
- Unequal Financial Contributions: If one party brought significantly more financial assets into the relationship or received a large inheritance during the relationship, the court may allocate a greater share of the property interests to that party.
- Non-Financial Contributions: A person’s role as a homemaker or primary caregiver is highly valued in family law. If one party made substantial non-financial contributions, such as raising children or maintaining the home, this will be considered in the asset division.
- Future Needs: The future financial needs of both parties are crucial. If one party has primary care of the children, has limited earning capacity, or has health issues that affect their ability to work, the court may adjust the split in their favour to ensure they can meet their future financial needs.
- Disparities in Earning Capacity: If one party has a significantly higher earning capacity than the other, the court may award a larger share of the assets to the lower-earning party to ensure a fair outcome. This adjustment is made to balance any financial disparity between the parties after separation.
- Superannuation: Superannuation is considered part of the community property and is included in the overall property pool. Its division depends on the contributions and future needs of each party. In cases where one party has significantly more superannuation savings than the other, the court may redistribute part of these funds to achieve a fair outcome.
Reaching a Property Settlement Agreement
While the family court can intervene in property settlement matters, it’s often better for both parties to reach an agreement through negotiation or mediation. Doing so can help avoid the stress, time, and costs associated with court proceedings. If an agreement is reached, it should be formalised with a legally binding financial agreement or consent order to ensure that both parties are protected.
If you’re struggling to reach an agreement with your former partner, seeking advice from an experienced divorce lawyer can help guide the negotiation process. Legal professionals can help you understand your rights, including issues related to separate property, and ensure that any agreement reflects the contributions and future needs of both parties.
The Goal is to Achieve a Division That is Fair and Equitable
A 50/50 property split is not always the case in family law. The court considers the unique circumstances of each relationship, including the financial and non-financial contributions of each party, their future needs, and any disparities in earning capacity. This process may involve splitting assets unequally when one party holds a substantial asset or has a significantly lower earning capacity.
If you need advice on property settlement or any other family law matter, contact Simonidis Steel Lawyers today for expert guidance tailored to your unique situation. Let us help you achieve the best possible outcome for your future.
