There are a lot of myths surrounding de facto separation and divorce in Australia. One is that assets are split 50/50 between the parties.
The fact is, there is no set percentage split ratio that separating couples should use when dividing the assets and liabilities after a relationship breakdown. Each situation is unique and based on individual circumstances.
But even though there is no set ratio, the Family Law Act sets out a process to determine how assets and liabilities should be split.
The courts and lawyers use this process determine the proportion of the asset pool that each party will receive. These factors fall under two main categories: ‘contributions’ and ‘future needs’.
The process to divide assets
The Family Law Act sets out the following 4 step process for determining a property settlement:-
- 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.
Once you have completed this process, you can formalise your agreement by way of a binding financial agreement (which can be made between the parties privately without the involvement of the court) or consent orders.
First step: Identifying the property pool
In order to complete the property division process, you must start with an accurate breakdown of the assets and liabilities. To do this, both parties must make full disclosure of all assets and liabilities.
Hiding or not disclosing the full extent of assets is classed as a type of fraud under the Family Law Act.
What assets do I need to disclose?
Disclosure needs to be made as at the date that you are making your agreement or consent orders – not the date of separation as some people mistakenly believe.
This includes:-
- assets and liabilities currently held in your joint names;
- assets and liabilities currently held in your sole name only or your partners sole name only;
- assets that you brought into the relationship;
- assets accumulated during the relationship;
- assets accumulated after separation up until the date you make your agreement or consent orders. (So if you’ve opened a separate account in your sole name after separation into which you have been transferring funds, you need to disclose it.)
What assets do I need to disclose?
Anything of value needs to be disclosed. For example:-
- shares, stocks, bonds, investment portfolios;
- cash;
- bank account balances – joint and individual accounts;
- superannuation;
- cash value insurance;
- artwork and other investment pieces;
- cars and recreational vehicles;
- farm equipment and machinery;
- livestock;
- marital home;
- investment properties;
- monies loaned to others that are being repaid with interest;
- business interests – goodwill and business values;
- business assets – cars, equipment, machinery, bank accounts; and
- interests in companies, partnerships, trusts.
What liabilities do I need to disclose?
All liabilities (debts) as at the date you are making your agreement. Identify:-
- credit card debt;
- store cards;
- mortgages;
- vehicle loans;
- personal loans;
- business liabilities;
- taxation liabilities;
- capital gains tax;
- school fees;
- any other debts, losses or liabilities.
In our next post – we’ll discuss Step 2 “Weighing Up the Contributions”
