Property settlement is often one of the most complex and contentious aspects of separation or divorce. Whether you’re navigating a marriage or de facto relationship breakdown, understanding how property is divided under Australian family law is essential. The Family Law Act 1975 (Cth) sets out the legal framework for property settlements, ensuring a “just and equitable” division of assets and liabilities. This article delves into how the court assesses property division, relevant factors considered, and key case law to illustrate how settlements are determined.

What Constitutes “Property” in Family Law?

Under the Family Law Act 1975 (FLA), property includes all assets and liabilities of both parties. This can encompass real estate, savings, businesses, superannuation, investments, debts, and even personal property like cars and furniture. Importantly, the court considers the entirety of the parties’ property pool, even if some assets are held solely by one party.

Section 79 of the FLA governs how property settlements are conducted for married couples, while Section 90SM applies to de facto relationships. According to Section 79(1), the court has the power to “alter the interests of the parties” in their property, which may include ordering a sale, transfer, or the payment of a lump sum.

The High Court case Stanford v Stanford (2012) FLC 93-518 emphasised that the first step in any property settlement is identifying and valuing the legal and equitable interests in the property. Without this, the court cannot proceed to alter property rights. In Stanford, the court clarified that the phrase “just and equitable” requires a consideration of existing property rights before any alteration is made.

Key Factors Considered in Property Settlements

The court must consider a wide range of factors when deciding how to divide property. The legal process generally follows a four-step approach, as outlined in Hickey v Hickey (2003) FLC 93-143:

1. Identify and value the property pool: The court will first establish the net value of the combined assets and liabilities. This includes real estate, bank accounts, superannuation, investments, and debts.
2. Assess each party’s contributions: The court evaluates both financial and non-financial contributions. Financial contributions include income, savings, and assets brought into the relationship, while non-financial contributions might involve homemaking or childcare roles. For example, in Farmer & Bramley (2000) FLC 93-060, the court awarded a portion of the husband’s lottery winnings to the wife, as she had made substantial non-financial contributions to the marriage before the win.
3. Consider the future needs of the parties: Under Section 79(4)(d-f) of the FLA, the court must also take into account factors such as the age and health of the parties, their future earning capacity, and any responsibility for caring for children. For instance, in Kennon v Kennon (1997) FLC 92-757, the court recognized that a wife’s reduced earning capacity due to family violence during the marriage warranted a larger share of the property.
4. Determine whether the proposed division is “just and equitable”: Ultimately, the court must ensure that any division of property is fair. This principle is enshrined in Section 79(2), which mandates that the court cannot make an order unless it is “just and equitable” in all circumstances. For example, in Mallet v Mallet (1984) 156 CLR 605, the High Court emphasised that fairness is not always equal, and the court must consider a wide range of circumstances.

Private Property Agreements

It is not uncommon for separating couples to reach a private agreement on how to divide their property. These agreements can range from informal verbal arrangements to formal Binding Financial Agreements (BFA), as defined in Sections 90B–90D of the FLA. However, if such an agreement is not legally binding, it may not hold up in court.

As seen in In the Marriage of Burgoyne (1978) FamCA 64 and In the Marriage of Candlish and Pratt (1980) FamCA 25, the court is not bound by private property agreements unless they comply with the formal requirements of a BFA. Even so, the terms of these agreements can still be considered by the court when making a decision under Section 79. The Stanford case highlighted that such agreements might influence the court’s assessment of what is just and equitable, especially if they reflect the parties’ understanding of a fair property division at the time of separation.

Superannuation and Property Settlements

Superannuation is often a significant asset in property settlements. Under the Family Law Act, superannuation is treated as property and can be divided between parties. The Superannuation Splitting Laws allow for the division of superannuation, meaning that one spouse can receive a portion of the other’s superannuation benefits as part of the property settlement. The decision in Coghlan v Coghlan (2005) FLC 93-220 made it clear that superannuation must be treated as property, but because of its unique nature, it is often divided differently from other assets.

Exempt or Quarantined Assets

In some cases, certain assets might be exempt from division or “quarantined.” For example, inheritances or lottery winnings received after separation might not be divided between the parties. The case of Bishop v Bishop (2013) FLC 93-553 illustrated that such assets could be excluded from the property pool if they have been clearly segregated from the joint assets.

However, even these assets may still be taken into account when assessing each party’s financial resources, as per Section 75(2). For instance, while an inheritance might not be directly divided, it could still impact the overall settlement if one party’s financial position is significantly bolstered by the inheritance.

How Montgomery Legal Practice Can Assist You

Navigating a property settlement after the breakdown of a relationship can be challenging, particularly when dealing with complex issues like superannuation, family trusts, or private agreements. At Montgomery Legal Practice, we understand that each case is unique and requires a tailored approach. Our experienced family law team can guide you through the property settlement process, ensuring that your rights are protected and that you receive a fair and equitable outcome.

If you are facing a property settlement, contact us today to discuss your situation. We provide expert legal advice and representation to help you achieve the best possible result. Whether through negotiation or court proceedings, Montgomery Legal Practice is here to support you every step of the way.