Divorce can be emotionally tiring, and one of the most significant concerns for couples is the division of assets.
The legal system in Australia follows a specific asset distribution approach to ensure fairness and equity.
The division is not a simple 50/50 split but rather a complex process that considers various factors such as financial contributions, non-financial contributions, future needs, and the overall fairness of the division.
The court aims to achieve a just and equitable distribution of assets.
This article written by our property settlement lawyers discusses how are assets divided in a divorce in Australia based on the relevant laws and guidelines.
How Are Assets Defined?
Assets include real estate, cars, savings, shares, inheritances, compensations, redundancy packages, lottery wins, and even superannuation benefits.
Liabilities like debts, mortgages, and loans are also considered. Financial resources, which are future financial benefits like pensions or anticipated inheritances, are also considered but often treated separately.
How are Assets Divided in a Divorce
- Asset, Property and Liability Valuation: Initially, all assets and liabilities are identified and valued. This includes everything acquired before, during, and even after the marriage until the time of separation.
- Contributions of Each Party: The court considers both financial contributions (like income and property) and non-financial contributions (like homemaking and childcare).
- Future Needs: Factors like age, health, financial resources, and the responsibility of caring for children are taken into account. The court may adjust the division of assets based on these future needs.
- Practical Effect of Settlement: The court aims to ensure that the settlement is fair and does not leave one party in a significantly disadvantaged position.
- No Gender Bias: Australian law does not discriminate or allocate wealth based on gender. The focus is on contributions and future needs.
- Property Owned Before Marriage: If one party owned property before marriage, its treatment in the asset division depends on factors like contributions by the other party to that property and how it was used during the relationship.
- Special Circumstances: Situations like inheritances, lottery wins, or significant gifts can also influence the division of assets.
- Spousal Maintenance: This may be applicable if one partner cannot support themselves adequately post-divorce. Factors like age, health, income, and the ability to work are considered.
- No Automatic 50-50 Split: There’s a common misconception about a 50-50 split in divorces, but the reality is more complex and tailored to each case.
- Children’s Care: The primary caregiver of children under 18 often receives adjustments in their favour to cater for their future needs.
What’s the Process for Dividing Assets in a Divorce?
The division of assets in Australia follows a four-step process:
1. Valuing The Assets
In this initial step, both parties must disclose all their assets and liabilities.
This includes everything from real estate and vehicles to savings accounts, shares, and superannuation benefits.
The goal is to understand the couple’s financial situation comprehensively.
These assets and liabilities are then valued to determine the total net asset pool.
Being transparent and honest during this phase is crucial, as hiding assets can lead to legal repercussions.
- Full financial disclosure is mandatory.
- Assets acquired before, during, or after the marriage are included.
- Liabilities like debts and loans are also factored in.
2. Valuing The Contributions of Each Party
Once the asset pool is defined, the court assesses the contributions made by each party.
These contributions can be financial, such as income earned, or non-financial, like homemaking and childcare.
Even indirect contributions like gifts or inheritances are considered.
The court will then adjust the asset pool based on these contributions, often on a percentage basis.
- Both financial and non-financial contributions are assessed.
- Contributions can be direct or indirect.
- The timing of contributions (before or during the marriage) can also be a factor.
3. Calculating Future Needs
This step involves looking ahead to each party’s future financial needs.
Various factors are considered, such as age, health, income, earning capacity, and the care and support of children.
For instance, if one party has primary custody of young children, that could impact their earning capacity and may warrant a larger share of the assets.
- Age, health, and income are significant factors.
- Care and support of children can influence asset division.
- New relationships and their financial implications may also be considered.
4. Considering The Practical Effect
Finally, the court evaluates whether the proposed asset division is just and equitable.
This sort of “sanity check” ensures a fair and practical division for both parties.
The court will look at the totality of the circumstances, including any adjustments made for future needs, to arrive at a final, fair division.
- The court aims for a just and equitable division.
- This is the final review to ensure fairness.
- Most cases result in a 50-65% division to one party.
Do I Have to Go to Court to Split Assets?
No, you don’t have to go to court. Couples are encouraged to agree on asset division through mediation or legal advice.
If an agreement is reached, it can be formalised through a financial agreement or a consent order from the court.
What Are the Time Limits?
For married couples, if you get a divorce and still need to sort out your property arrangements, you must apply to court for property orders within 12 months of your divorce becoming final.
For de facto relationships, the time limit is two years from the date of separation.
How We Can Provide Assistance
We recently had the opportunity to assist a successful restaurant owner contemplating filing for divorce from her husband.
The client was particularly concerned about how the assets would be divided, given the value of her business and other joint assets.
She was understandably anxious about her restaurant, a business she had built from the ground up.
Our first step was to assure her that we would provide tailored advice to protect her interests.
We began by asking the client to list all her and her husband’s assets and liabilities, including the restaurant, real estate, and shared debts.
We advised her to be transparent and honest, as full financial disclosure is mandatory in these cases. We then worked with financial experts to accurately value these assets.
The client was the primary financial contributor due to her successful restaurant, while her husband had been more involved in homemaking and childcare.
We explained that both financial and non-financial contributions would be considered in the division of assets.
Considering her age, health, and earning capacity, we discussed the client’s future needs.
Given that she would likely retain custody of their children, we considered how this would impact her future financial needs.
We also considered her husband’s future needs, including his lower earning capacity.
Finally, we ran through various scenarios with the client to show how different divisions of assets would impact her.
We sought a just, equitable, practical division for her business and personal life.
Seek Legal Assistance
Navigating asset division process in a divorce is no walk in the park.
Each step is fraught with legal intricacies that require a nuanced understanding of Australian Family Law.
While this guide offers a comprehensive overview, it’s essential to remember that each divorce case is unique, with its own set of challenges and complexities.
Therefore, seeking professional legal assistance to guide you through this challenging time is always advisable.
A qualified family lawyer can provide tailored advice that aligns with your specific circumstances, ensuring that the division of assets is as fair and equitable as possible.
Director of Melbourne Family Lawyers, Hayder manages the practice and oversees the running of all of the files in the practice. Hayder has an astute eye for case strategy and running particularly complex matters in the family law system.