Separating or divorcing is such an emotional and confusing time so it’s good to know the basics about how assets like property and superannuation are handled during the process. Here’s some information from Catherine, one our local mums who specialises in this area.
How are property division matters handled and is superannuation included?
When it comes to a breakdown of a relationship and the subsequent division of property that follows, the Family Law Act 1975 (Cth) (‘FLA‘) enables the Court to make a property division order. The Court currently uses a ‘3-4 step’ process when dealing with the distribution of property. A common question that our clients have is whether superannuation is included in the property pool. Superannuation is definitely included in the property pool, though some parties may be content for each party to retain their own superannuation interests.
The laws governing property disputes between parties in a de facto relationship are almost identical to the provisions governing disputes between married couples, although there are differing time limits in which property proceedings can be initiated. An application must be filed:
- within 12 months for married couples after the divorce has become absolute; or
- within 24 months for de facto couples following the end of your relationship.
An application may be made outside of these time limits, though you would need to adequately explain the delay and be granted leave of the Court to bring the application. Wherever possible, this hurdle should be avoided by complying with the strict timeframes above.
The current ‘3-4 Step’ process
If both parties come to an agreement regarding financial matters, they can either enter into Consent Orders or enter into a Binding Financial Agreement. However, if the parties cannot come to an agreement regarding property settlement, the ‘3-4 step’ process provides that the Court should:
- Identify and value the net property of the parties;
- Consider the financial and non-financial contributions of the parties;
- Consider each party’s future needs; and
- Consider whether the proposed distribution is, in the circumstances, just and equitable.
Throughout the whole process, there is a duty on the parties to provide full and frank disclosure as to their financial positions. There are serious implications that befall those who fail to discharge this obligation.
The Court also aspires to apply the ‘clean break’ principle – effectively allowing both parties to move on with their lives. This principle attempts to end all financial binds between the parties, preventing any further litigation and expense.
Step 1 – Identifying and valuing the net property of the parties
At the date of the final hearing, the Court must identify and value the assets, liabilities and financial resources of the parties. Even at the very first step, identifying and valuing the net property of the parties should be quite straightforward in most cases, however this process can be complicated by multiple business interests, complex trust structures and the like.
There is a slight weight given to the duration of the relationship. Generally, in shorter relationships, the Court considers it fair that the parties take out what they brought into the relationship. The Court is more inclined to adjust property interests the longer the relationship and the longer the parties have intertwined their finances together.
Step 2 – Considering the financial and non-financial contributions of the parties
This part of the process involves assessing the contributions made by each of the parties during the course of their relationship, including direct and indirect financial contributions, non-financial contributions and contributions to the welfare of the family as homemaker and/or parent. Generally, in cases where young children are involved, one party may have worked and the other stayed at home to act as a ‘homemaker’. What this means, especially for the homemaker, is that they have forgone the opportunity to advance a career and build up their super in order to look after the household. The Court does not favour financial contributions over non-financial contributions. They both are given equal consideration to achieve a just and fair outcome.
Step 3 – Considering each party’s future needs
After the Court has assessed the parties’ financial positions, it must then determine whether a further adjustment needs to be made bearing in mind the parties’ future needs. Generally speaking, an adjustment will be made where there is a stark disparity between the parties’ earning capacity in the future.
This stage is relatively straightforward in cases where there are no children involved, both parties are in good health, and have a similar income earning capacity. However, in cases where, for example, one parent has the primary care of the children, there are significant disparities in income earning capacities or major health issues, this stage will be looked at in greater detail. Often, one party will have stayed at home to care for the children and this leads to a significant disruption to his or her career. The fact that the homemaker has also been absent from the employment market for a significant period may also hinder the future prospects of attaining a higher paid job. Further, if children are involved, it only makes sense to ensure that both parties are not left in dire financial situations for the best interests of the children.
Step 4 – Consider whether the distribution is just and equitable
The final step of the process is that the Court will not make an order under the FLA unless it is satisfied that, in all the circumstances, it is just and equitable to make the order. What this means will differ on a case by case basis as every property division matter is unique. Regardless, this step is a good reminder to approach family property settlement matters from a holistic point of view and consider each individual case on its own merits.
Counting superannuation in the property pool
With the passing of the Family Law Legislation Amendment (Superannuation) Act 2002 (Cth), the FLA was amended to include superannuation as property. Therefore, superannuation is considered part of the asset pool to be divided.
The main reason for including superannuation in the property pool is that generally, one party may have made greater non-financial contributions to the running of the household at the expense of building their super. Further, the fact that super cannot be held in joint names, as can other assets means that it is easy for parties to use their super funds to ‘protect’ assets that they did not want to be shared. Therefore, it is only fair that superannuation interests be considered as part of the property pool.
If you, or any of your family or friends, are experiencing a family law issue, Hills Family Law Centre is here to help. We offer an initial, no obligation, consultation with you to discuss your matter. During our initial consultation with you, we take the time to understand your unique situation and provide you with preliminary advice in relation to your rights and obligations under the FLA. We will discuss the various options available to you and provide you with an estimate of anticipated legal costs. You will then be in a position to digest that information and make a well-informed decision about how best to move forward for yourself and your family.
Disclaimer: The information contained in this article is a general summary and is not intended to be, nor should it be, relied upon as a substitute for legal advice. You should consult a family lawyer to discuss any family law issues you may be experiencing.
