In our last post we started to debunk a common separation myth – the 50/50 property split. Many people believe that the property pool must be divided in a 50/50 split regardless of any personal circumstances. This just isn’t true, and while there are no hard and fast rules, the Family Law Act does set out a 4 step process for determining how a property pool should be divided. Those 4 steps are:
- Identifying the property pool;
- Considering the ‘contributions’ of the parties;
- Considering the ‘future needs’ of the parties;
- Deciding on a fair division based on the circumstances.
Let’s look at the Second step: Weighing up the ‘contributions’
Once you have idenitified the property pool you need to consider the contributions of the parties to the asset pool (s 79(4) of the Family Law Act).
- What assets did each partner bring into the relationship? Did one or both of you already own a property, have savings in the bank, superannuation, investments or any other type of assets that you brought into the relationship?
- Were any special contributions made during the course of the relationship, such as inheritances, gifts, payouts, loans or windfalls? How were the special contributions used? Were they quarantined for the sole benefit of one party only, or were the funds applied to the marriage or to the marital assets for the benefit of both parties?
- Other direct or indirect financial contributions by the parties to acquire, conserve or improve any assets.
- Any non-financial contributions by the parties to acquire, conserve or improve any assets such as renovations, repairs, maintenance, extensions or improvements.
- Contributions made for the welfare of the family including in the capacity of homemaker or parent.
Examples from Real Life
When looking at contributions to property, you need to identify both financial and non-financial contributions. These contributions can be direct or in-direct.
For example, the husband pays all of his income into the mortgage, while the wife uses her income for household, living and lifestyle expenses. In this way, the wife has indirectly contributed to the home by paying all of the household and living expenses and thus freeing up the husband to pay the entirety of his wage into the mortgage.
You also need to evaluate non-financial contributions to the property which can include renovations and other physical labour contributions to the improvement of the property.
A slightly different scenario involves contributions made for the ‘welfare’ of the family. These are considered under s 79(4)(c) Family Law Act and include contributions as a home maker or parent.
For example, a husband paid for the bulk of the matrimonial assets with his income. The wife stayed home to raise 3 daughters and run the home. In doing so, the wife gave up her career, salary and ability to earn superannuation. On separation, the wife mistakenly believes that she is not entitled to a share of the property because she has not contributed monetarily. The court places a high value on the role of home makers and parents and this is reflected in the property settlement they make. You should take home-making or parenting contributions into account when deciding how to split property.
In our next post- we’ll explain Step 3 Considering the future needs of the parties.
