How Are Assets Divided in De Facto Relationships?
In Australia, the division of assets in de facto relationships is not a straightforward 50/50 split, as commonly believed.
Instead, it’s a complex process governed by the Family Law Act, which considers various factors such as the contributions made by each party, their future needs, and the overall circumstances of the relationship.
This article explains the intricacies of asset division in de facto relationships, debunking myths and providing a clear understanding of the legal frameworks involved.
The Myth of the 50/50 Split
Many people assume that assets are divided equally in a de facto relationship. However, this is a myth.
There is no set percentage for asset division based on individual circumstances. The Family Law Act outlines a process that considers both parties’ contributions and future needs.
What Constitutes a De Facto Relationship?
According to Australian family law, a de facto relationship exists when two people of the same or opposite sex live together on a genuine domestic basis as a couple.
You can’t be married to each other or related by family.
Do You Have to Go to Court?
Not necessarily. Many couples can formalise the division of assets without court involvement.
However, you can apply to a court for financial orders if an agreement can’t be reached.
Identifying the Property Pool
The first step in the division process is identifying all assets and liabilities. Both parties must fully disclose all assets, including those held in joint or sole names.
What Assets and Liabilities to Disclose?
Assets include everything from the family home to superannuation, while liabilities could range from credit card debt to mortgages.
How is Superannuation Affected?
Superannuation is a unique asset and is subject to specific rules. Splitting super doesn’t convert it into cash; it remains subject to access rules.
The Family Law Act sets out a 4-step process for property settlement:
- Identifying the property pool
- Considering the contributions of both parties
- Considering the future needs of both parties
- Deciding on a fair division based on circumstances.
How We Can Help
Recently, we had the opportunity to assist a client who was deeply concerned about the division of assets in her de facto relationship.
The female entrepreneur, the client, had just launched her own business and was understandably anxious about how this new venture would be considered in the asset division process.
She contacted our law firm seeking clarity and guidance on her unique situation.
After an initial consultation, we immediately got to work, reviewing her financials and the contributions both she and her partner had made to their shared and individual assets.
Given that her business was in its infancy, we explained that under Australian law, particularly the Family Law Act, the court considers various factors such as contributions to the relationship, future needs, and other circumstances.
We advised her on the best strategies to protect her business interests while ensuring a fair division of other shared assets.
To provide her with comprehensive support, we also connected her with financial advisors who could help structure her business assets in a way that would most benefit her future, regardless of the relationship’s outcome.
It Is Best to Seek Legal Advice
Navigating the division of assets in a de facto relationship can be a complex and emotionally taxing experience.
While this article aims to provide a comprehensive overview, it’s important to remember that each relationship is unique, with its own circumstances that can impact the division of assets.
Given the complexity of the legal frameworks involved, seeking professional legal advice is highly advisable to ensure you’re making informed decisions in your best interest.
Don’t leave your financial future to chance; consult a legal expert to guide you through this challenging life event.
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.