When a relationship breaks down, one of the most significant legal and emotional challenges is the division of property and assets. Whether you're married or in a de facto relationship, property settlement is the process that formalises how your financial assets and liabilities are divided between you and your former partner. In Australia, property settlements are governed by the Family Law Act 1975, and understanding how the process works is crucial to ensuring a fair outcome.
This article will guide you through what to expect, the steps involved, and your legal rights when it comes to property settlements.
What Is a property settlement?
A property settlement is the legal process that outlines how property, assets, and liabilities will be divided between separating parties. The term “property” refers to a broad range of assets, including:
- The family home and any investment properties
- Bank accounts and savings
- Superannuation
- Vehicles
- Shares and investments
- Businesses
- Personal items such as furniture and jewellery
It's important to note that property settlement doesn’t only involve dividing physical property. Debts, such as mortgages, credit cards, and loans, are also considered in the process, and they must be accounted for when reaching an agreement.
Do I need to go to court for a property settlement?
Not necessarily. Many couples can reach an agreement about property division without the need for a court hearing. However, even if you come to an agreement, it's vital to formalise it through a Consent Order or Binding Financial Agreement (BFA) to ensure it is legally binding and enforceable. If you cannot reach an agreement, you may need to seek court intervention to resolve the matter.
The four-step process for property settlements
The Federal Circuit and Family Court of Australia (“the Family Court”) follows a four-step process to determine what is a fair and equitable division of assets:
- Identify and Value the Assets and Liabilities: This includes both assets and debts. Everything that was acquired during the relationship and sometimes before or after, depending on the circumstances, is included.
- Assess the Contributions of Both Parties: This step considers both financial contributions (e.g., income, assets brought into the relationship) and non-financial contributions (e.g., homemaking, child-rearing).
- Evaluate Future Needs: The court then considers each party’s future financial needs. This includes factors such as age, health, ability to earn income, and responsibilities for any children from the relationship.
- Ensure a Just and Equitable Outcome: The final division must be fair. The court uses the first three steps to ensure that both parties receive an appropriate share of the assets based on their individual circumstances.
Consent orders vs binding financial agreements (BFA)
Couples can finalise a property settlement through either a Consent Order or a Binding Financial Agreement. Here’s how they differ:
- Consent Orders: These are agreements submitted to the Family Court for approval. The court reviews the agreement to ensure it’s fair and legally binding.
- Binding Financial Agreements (BFA): A BFA is a private contract between the parties that doesn’t require court approval. However, both parties must seek independent legal advice to make the agreement legally binding.
What happens if you cannot reach an agreement?
If you cannot agree on how to divide your property, you may need to apply to the Family Court for a decision. The court will then follow the four-step process to determine what is just and equitable. Keep in mind that court proceedings can be lengthy and expensive, which is why it's often in your best interest to attempt negotiation or family dispute resolution (FDR)before escalating to court.
Superannuation and property settlement
Superannuation is often one of the largest assets in a property settlement. In Australia, superannuation is treated as a form of property, which means it can be divided between separating parties. The process of dividing superannuation is known as superannuation splitting, and it can be done as part of a property settlement agreement.
Time limits for property settlement
- For married couples, property settlements must be initiated within 12 months of the divorce being finalised.
- For de facto couples, you have up to 2 years from the date of separation to commence property settlement proceedings.
Failing to adhere to these time limits can complicate the process and may require permission from the court to proceed.
Tax implications of property settlements
While family law property settlements are generally tax-neutral, some financial transactions, such as transferring assets or selling properties, may trigger capital gains tax (CGT) or stamp duty. It's essential to seek professional advice regarding the potential tax consequences of your property settlement.
At Eliza Legal, we specialise in helping individuals and couples navigate property settlements after separation. Whether you need assistance negotiating a settlement or representing your interests in court, our team of experienced family lawyers is here to provide expert guidance. We can help you achieve a fair division of assets, taking into account your contributions, future needs, and the best legal options available to you. Contact us today and let’s see if we’re a good fit! We’d love to help you.
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