The contributions made by each party to a marriage fall into the following categories:

• financial contributions,
• non-financial contributions,
• contributions to the care and welfare of the family and
• contributions in the capacity of home-maker or parent.

In many cases, particularly where there has been a long relationship, the determination will be that the parties have contributed equally. The contribution of the parties may be viewed as something other than equal, where:-

• the relationship is short and there are no children, here the main concern will be about direct financial made by each of the parties;
• a partner has brought considerably more assets to the relationship than the other party;
• one of the parties contributed substantially via an inheritance, gift or personal injury settlement;
• a partner has special skills or has made outstanding efforts which have brought substantial wealth into the relationship; or
• a partner behaved in a deliberate or reckless manner resulting in a loss to the parties.

Assets are usually split half-half and then any necessary adjustments are made, taking into account all other factors including contributions.

If there has been violence in the relationship, this can affect the division of property. This is due to the possibility that the effects of violence may have limited the ability of a party to contribute.

Financial contributions

Financial contributions are any monetary contributions made to the marriage either:

• before the marriage,
• during the marriage or
• after separation.

The financial contributions made by each party make up the asset pool.

Career assets are also financial contributions. They include contributions such as income, long-service leave and redundancy payment.

Notional assets are included as financial contributions. Notional property can be items such as legal costs and money spent individual pursuits such as gambling.

Financial contributions made before the marriage

Sometimes a party brings property to the marriage. Deciding how this property is shared depends on how the property is used and how the other spouse contributes to the property. The interest of the spouse bringing the property may be eroded by the passage of time and by the other party’s contribution to it and the asset will then be added to the asset pool.

Financial contributions made during the marriage

Financial contributions can be made towards purchasing, maintaining and improving property. They can be made either directly by a spouse or on behalf of the spouse.

A lottery win would be a financial contribution made during the marriage if the ticket is purchased during the marriage using joint funds. The winnings would be a ‘joint contribution’ and would be shared as such.

The beneficiary spouse of an inheritance may be allocated the assets of the estate, in circumstances where there is a substantial quantity of assets in the asset pool. Otherwise the inheritance is divided. The timing of the inheritance will be an important consideration.

A compensation payout is usually seen to have had both spouses contributing. The entitlement of the injured spouse is based on suffering and the entitlement of the other spouse is based on the contribution of caring for the injured spouse.

Financial contributions after separation

There are two methods of considering entitlements to property acquired after separation.

The first method considers how the property is used and how the other spouse contributes to the property. The interest of the spouse owning the property may be balanced by the other party’s contribution to it and the asset will then be added to the asset pool.

The second method looks at contributions after separation made by the non-owner spouse towards all matters concerning both parties.

Case: Husband wins $5M in lottery after separation

In Farmer and Bramley, the husband acquired a winning lottery ticket 20 months after separation. The prize money was $5,000,000. Until the win, the parties had no property after a relationship of 12 years. There was one child of the marriage who lived with the mother. The wife was entitled to $750,000 as she cared for the child after the separation and also cared for the husband during the marriage, nursing him through a heroin addiction.

Career assets in a family law property settlement

Sometimes one spouse obtains a valuable qualification whilst accumulating minimal property, meanwhile the other spouse takes additional responsibility for financial and family support. In these circumstances, the career assets of the qualification earning spouse are brought into the asset pool as a financial resource. The spouse without the qualification can be awarded payments for the extra responsibilities accepted and carried out.

Career assets can be difficult to value, as different qualifications take different amounts of time and effort to complete and may or may not lead to employment.

A partnership interest in a business is property, however such interests are often considered to be personal and not transferable to a third party such as a spouse.

Prospective long service leave and redundancy payment entitlements will only be regarded as property if payments have been received.

If a spouse is a company director, shares owned by the director in this company will form part of the asset pool, however assets owned by the company will not. Any shares held in public or private companies can be included as property in the asset pool.

Notional assets in a family law property settlement

Financial resources may include legal costs paid, property disposed of for the benefit of only one of the parties, expected inheritances and gifts from parents. These financial resources are calculated and allocated by the court or according to agreement between the parties.

Income is usually not included as a financial asset and is not considered property for the purposes of a property settlement. However, it can be taken into account as an additional factor. A party with little in terms of financial assets may be awarded more property assets to compensate, this is in the interests of ensuring a just and equitable result.

Money earned after separation is usually not ‘added back’ into the asset pool. However there are some exceptions, for instance if the funds arise from selling a business asset after separation where the business operated during the course of the marriage, then the funds may be included in the asset pool.

Case: Taxi license sold after separation

Usually funds accumulated post-separation are not added back into the asset pool, however, in some cases they can be. In the case of Townsend and Townsend, the money earned from a selling a taxi licence was included in the asset pool. The reason for including the money was that the licence had value during the marriage and therefore the other party was entitled to a proportion of the proceeds from the sale.

Legal costs are usually considered notional property and are included in the asset pool. It is necessary though for these funds to have been earned prior to separation.

Certain types of expenditure are considered to be notional property and will be ‘added back’ into the asset pool. These types of expenditure include gambling, behaviour contributing to addictions and extravagant gifts. If add back occurs then the reasonableness of the expenditure is taken into account and the assets added to the asset pool must be of a reasonable amount.

Non-financial contributions

Non-financial contributions to life as a couple are an important and significant consideration for a property settlement.

Non-financial contributions made to the marriage are contributions involving services where a professional or tradesman might have been employed had the party not performed the work.

Examples include maintenance and renovations of the family home, cars or any other asset owned by the couple.

Maintenance and renovations

Non-financial contributions may increase the value of property or save on maintenance costs. They are included as they effectively increase the value of the property or funds available. Factors considered are the quantity of work undertaken, the worth of the work and the party completing the work.

Contribution to the care and welfare of the family

Domestic and family welfare contributions have received increasing recognition and importance. Since 1983, these contributions have gained the status of a separately considered contribution.

Where one party works outside the home to support the family and the other takes care of the family contributions to the care and welfare of the family are an important consideration.

Examples of contributions to the care and welfare of the family are:

• caring for children,
• school drop-off and pick up,
• taking children to sport and other activities and
• responsibilities as a home-maker.

Case: Wife placed in domestic servitude granted 75% of assets

A man who married his sixth wife lost 75% of his assets, including his house and his business .. [read more].

This step involves identifying and valuing the assets, liabilities and financial resources of the parties.

Property includes all possible interests of the parties whenever and however acquired. It includes both property presently possessed and property expected (for example an inheritance.)  It may also include assets and liabilities disposed of in the past.

Property and financial resources are recognised separately. Property can be sold or transferred today, whereas a financial resource (for example superannuation or a damages claim) cannot be separated from a person.

Property must be identified at the date of settlement, not at the date of separation. When identifying assets full and frank disclosure should be demonstrated.

This is a simple step in many cases, but for some cases, particularly those involving businesses, the valuation exercise can be quite complex and require the assistance of experts.

How are liabilities treated in a family law property settlement?

Liabilities are given similar importance to the property of both parties. The net asset pool is commonly determined by calculating total assets and then subtracting total liabilities as follows:

Net Asset Pool = Total Assets – Total Liabilities

Liabilities are deducted from assets regardless of which party is responsible for incurring or paying them. The net asset pool is then shared between the parties on the basis of the contribution of each party and consideration of the additional factors/‘future needs’.

Liabilities to deduct from the asset pool include:

• mortgages,
• credit card debts,
• tax liabilities,
• overdrafts and
• personal loans.

Debts are usually shared, unless one party has wasted assets of the marriage (for example, gambling or efforts to deliberately decrease the asset pool). These debts are not deducted from assets as liabilities normally would be.

Debt might not be included where a family member has lent money. The reason for excluding this type of debt is that there is often a possibility that this debt will not be collected. This type of debt may arise in various situations and may be owed to people other than family members.

Full and frank disclosure must be demonstrated when identifying and declaring assets. Otherwise, the Court has the option of favouring the other party due to dishonesty/lack of credibility on the part of the non-disclosing party.

Click here to calculate your asset pool using the Matthews Family Law Asset Pool Calculator.

If negotiations fail and you cannot reach an agreement with your former partner about your property settlement then you will need to file an application for property settlement in the appropriate Court.

There are ongoing opportunities for settlement of the proceedings, even after filing an application with the Court. Most applications are settled by consent and without a decision being made by the Court.

If a settlement is not reached, then the Court will decide how the property should be divided after a hearing which follows the four step process.

When you apply for a property settlement, the Court uses a ‘4-step’ process to determine the application as follows:

1. identification and valuation of assets,
2. contributions of each party (financial and non-financial),
3. additional factors/’future needs’ and
4. the just and equitable requirement.

Your family lawyer will carefully consider all aspects of your case and advise you on your entitlements. Your lawyer will assist you to negotiate with your former partner in an attempt to reach an amicable outcome.

Parties are often able to reach an agreement about a property settlement and they can then apply to the Court for Consent Orders which is a relatively simple and inexpensive process.

If Consent Orders are made then the parties can rely on the knowledge that their agreement is binding and enforceable. An additional advantage is that certain tax benefits may be available to you.

An alternative to Consent Orders is a binding financial agreement which has different considerations and benefits.

Certain matters may be urgent and an application can be lodged for the matter to be heard quickly by the Court. An urgent application might be for:

• the sale of the former family home,
• the sale of an asset,
• the payment of a liability,
• exclusive occupation of the former family home,
• one partner to continue to make mortgage payments, or
• protection and preservation of assets.

There are a number of issues to be considered for a property settlement, some of which you may not even have thought are relevant, such as your and your former partner’s superannuation entitlements. Further issues to be considered may include:

• assets and liabilities of each party,
• how much did  each party contribute financially,
• domestic duties performed by each party,
• who looked after the children,
• superannuation,
• any gifts received and
• inheritances.

One of the most important, and perhaps the most difficult, issues facing couples who separate is the question of ‘who gets what?’ The Family Law Act provides for property settlements between couples who are, or have been, married and also couples in a de facto relationship (including same sex couples). Most property settlements are dealt with by the Federal Circuit Court or the Family Court.

[Case: John and Kate’s Separation]

Strict time limits apply to commencing property settlement proceedings in a Court. You must apply for a Court Order within two years from the date your de facto relationship ended or within one year from when your divorce order became final. It is important that you seek proper legal advice as soon as possible (including while contemplating separation).

The lawyers at Mathews Family Law & Mediation Services Melbourne have extensive experience negotiating property settlements for couples who have a substantial asset pool, such as a major property/share portfolio or a family business. We understand both the emotional and the commercial implications of splitting assets. We are committed to ensuring a fair settlement is achieved as quickly as possible, we aim to reduce the time taken and therefore the cost to you.

Mathews Family Law is a law firm based in Melbourne. Please contact us on +61 3 9804 7991 to speak with a family lawyer from our law firm today. You can also send through your enquiry online now and we will contact you shortly.

After ten years of marriage and two children John and Kate decided to separate. John had provided the funds to buy their first house and had spent an enormous amount of time improving the family home. He faced a dilemma, he didn’t want to leave the family home but if he stayed he was afraid he and Kate would end up having a major fight. John was afraid fighting would scare the children or that Kate might decide he shouldn’t see the children anymore .. [see more].

A Financial Agreement will be set aside in the following situations:

• if the agreement was obtained by fraud. Fraud includes deception, trickery or  the failure to disclose something that is relevant;
• if circumstances have arisen since the agreement was signed which make it impracticable for the agreement to be carried out;
• if the agreement is void, voidable or unenforceable, this involves principles of contract law which your lawyer can explain to you;
• If a material change in circumstances has occurred relating to a child and as a result of that change the child, or the parent caring for the child, will suffer hardship if the court does not set aside the agreement;
• if a party has, at the time the agreement was signed, behaved in a way that was unconscionable; or
• if a superannuation interest has not been dealt with appropriately.

[Case: Russian bride has Binding Financial Agreement set aside]