Divorce In Australia – Who Gets What?
It’s a common misconception in Australia that a divorce includes all aspects of separating, including the division of financial assets. In fact, divorce is the process of terminating the marital relationship of a couple, while who gets what in a divorce is determined by a financial settlement. Laws concerning divorce in Australia are covered under the Family Law Act 1975, which encompasses marriage, divorce, de facto relationships, property settlements, guardianship, adoption and the care of children.
There are four options couples have when splitting their assets after divorce:
- A non-legal arrangement
- A binding financial agreement
- Consent orders, or
Non-legal arrangements are made when a couple splits amicably and is able to agree on how they will divide their assets without any legal documentation. This kind of agreement does not prevent one of the parties from going to court at a later stage to ask for financial orders under the Family Law Act.
A binding financial agreement is a legal document that can be entered into before, during or after the relationship. When entered into prior to marriage, they are referred to as a pre-nuptial agreement. Binding financial agreements are final, enforceable and essentially exclude the court from overruling them, other than in exceptional circumstances.
Consent orders are made when couples use legal counsel to draft the division of their assets and file the order to the court to be finalised.
Litigation is where the family court determines how the couple’s assets and liabilities will be split. This is the most lengthy and costly process, and usually requires attendance in court. This is generally a last resort option due to its emotional and financial impact on families.
How Assets are Divided in Australian Divorce Courts
Most people assume they are entitled to a 50/50 split of assets, however, there are a number of contributing factors considered when splitting assets in divorce including physical and financial assets and liabilities. More often than not a 50/50 split isn’t actually the fairest outcome. The process of determining the most just and equitable split of assets is calculated under the Family Law Act using a four-step process, outlined in this article.
You may have been led to believe that anything you own in your own name only is yours, and anything you own jointly with your ex-spouse will be split between you, however, this isn’t always the case.
Who gets what when splitting assets has more to do with the contributions and needs of each person, than who’s name is attached to what item. This is to ensure one person isn’t disadvantaged, for example, if one person has been the primary caregiver of children, and therefore has less financial stability, or fewer retirement savings.
Even the most amicable of couples can find the division of assets emotional and challenging. This is why it’s important to seek out independent legal counsel, as having an experienced divorce lawyer will help you to understand the needs and rights of both you and your ex-spouse. The experienced team at Peter Andrews Lawyers will guide you through the following practical steps to help you and your ex-spouse reach a fair financial (also known as property) agreement.
- Valuation of assets
- Assessing the contributions of both parties
- Determining future needs
- Evaluating the impact
Valuation of Assets
The first step of the process is to assess the assets and liabilities you and your ex-spouse have. This includes both those you have jointly, but also those assets and liabilities you each have on your own. This step requires each party to fully disclose individual bank balances, the value of owned property or shares, debts owing on loans and any interest in a business or company.
Assets and liabilities that need to be considered in the pool include those acquired during the relationship, before, and sometimes after. For example, if one of you already owned a property before entering the relationship, the value and debt of this will usually be included in the asset pool. Similarly, any assets or debts acquired after the relationship ended will also be considered. For example, if one person accumulated a large amount of debt, or spent a large sum of the couple’s money after the relationship ended, this will be taken into consideration.
It’s important to undergo this process with an experienced lawyer to ensure all assets and liabilities are accounted for. There may be some that you or your ex-partner have not considered, such as superannuation or a debt one of you owes to a friend. In some cases, a partner may even attempt to hide assets from the process for an unfair advantage.
You may also find you feel entitled to 100% rights over an asset you acquired prior to the relationship, and that may end up being the case, particularly if your ex-spouse made no contributions to the asset. However, at this first stage, all assets and liabilities need to be thrown into the asset pool together.
Assessing the Contribution of Both Parties
This step is about understanding what each of you brought to the relationship, and while the income of each party is of course included, not all contributions to a relationship are financial.
Financial contributions can include wages, government allowances, inheritance, dividends from shares or any other financial income you receive.
The most obvious non-financial contributions that need to be considered are being a caregiver of children and a homemaker. There are others that may also apply to your situation, such as renovating a property, or even indirect contributions made by family members. These can include providing childcare, a deposit to purchase a property, or being a guarantor on a home loan.
Each of these contributions is assessed as a percentage or a range of percentages and compared against the asset pool to determine the first split of assets between the parties.
Determining Future Needs
Now that all of the assets, liabilities and contributions to the relationship have been assessed, your current and future needs must also be taken into account.
There are a number of things that need to be considered here for each person, including their age and health, their future earning capacity, employment prospects and financial resources, who will be responsible for looking after children of the relationship, individual living requirements, and the extent the relationship may have had on each person’s earning capacity.
Access to support from family members, such as for childcare, living arrangements or financial support may also be taken into consideration when dividing the asset pool.
Once the court has assessed this, it then makes an ‘adjustment’ to the percentages determined in the previous step, for the fair division of assets.
Division of Assets (´who gets what´)
Once all of the above has been considered, the courts will determine what portion of the asset pool each partner should receive.
You should also consider that it is not only assets that are split in a financial settlement, but debts as well. So, if one partner is given a larger portion of the asset pool, they may also be given more debt obligations.
Counting assets and liabilities, taking into account contributions and considering future needs sounds straightforward, however, for most couples, this is a difficult process. In fact, it can even be more challenging for amicable couples who want to do right by one another and consequently find themselves unsure how to proceed without rocking the boat. The experienced team at Peter Andrews Lawyers can help navigate this to help reach the best outcome for you.
A common challenge couples face is when they get fixated on a percentage they believe they deserve. While assets are rarely divided 50/50, there is no set percentage, and no hard and fast rules under the Family Law Act in Australia, meaning the split will be different for each couple. It’s better to focus on the goals and needs of each person to reach the fairest and most equitable settlement, and use percentage as a sense check, rather than the end goal.
Evaluating the Impact
The final step in the process is the court considering whether their split of the assets and debts is just and equitable to both you and your ex-partner.
Some men are led to believe that they will be worse off in a financial settlement even if they have been the main income earner in the relationship. This is usually untrue, as men are more likely to rebound quicker financially post-divorce than women. This is often because women who are the primary caregivers of children, and single, older women, are often most disadvantaged in terms of their financial circumstances and in particular their earning potential.
The court may determine one person is given a higher portion of the assets if they have significantly less earning capacity.
This may seem complicated, which is why it’s important to seek the advice of an experienced property and family lawyer, who can simplify the process and ensure you receive what you’re entitled to.
What am I entitled to in a Divorce Settlement?
When getting divorced, you will of course want to know how much you are entitled to. Because there is not a set rule under Australian law of the division of assets, it can be difficult to determine how you should split your assets and liabilities and will be different in each circumstance. While a 50/50 split is rare, you are more likely to end up with a 60/40 or even 70/30 divorce settlement.
The most common percentage split in the division of assets in Australia is 60/40. For many couples, one partner will contribute more financially, while the other may contribute more in way of caring for children and looking after the home. In these situations, you will find it most common that the financial contributor (often a male), will end up with 40% of the assets, while the partner who contributed mostly non-financially (often female), will get 60%. While this may seem unfair at face value, the court makes adjustments based on the future needs of the individuals. The male likely has more earning capacity and income, and are therefore deemed able to recover from the divorce more easily than their ex-spouse. The partner (usually female) who contributed mostly non-financially to the relationship would be given 60% of the assets if they are likely to be the primary caregiver of the children post-divorce, and their earning capacity is lower than their ex-spouse. In this case, they would be awarded a higher percentage to address their future financial needs.
A 70/30 split in the division of assets is rarer, however, it can still be done. This usually occurs when the asset pool is large (in excess of $10 million), and one partner contributed the majority of this. You may also see a 70/30 split when one partner is in a hurry to finalise the settlement and may want to settle for less than they are actually entitled to. This is when it is particularly important to seek advice from an experienced family and divorce lawyer. They can do the negotiating for you, and ensure you walk away with what you’re entitled to in a timely manner. Although financial settlement can be a stressful time, it’s imperative that you consider both your current and your future needs, as opportunities to reopen a financial settlement case are limited, and this may not always be an option available to you.
It should be noted that the longer a relationship lasts, the less important contributions are valued by the court, in that it’s understood in most cases that over a long period of time, the contributions to the relationship would be more or less equal (whether financial or not). This means that in some cases a 50/50 split is in fact the most appropriate. An example could be a couple who have been together for a long time and who are both retired, or perhaps a couple where one partner was the sole financial contributor, but the other partner was the sole caregiver for children. In short term relationships, where assets were acquired only jointly, there are no children, and the couple earns similar incomes, a 50/50 split may also be the fairest division.
Divorce Property Settlement Example
It’s human nature to want to seek out situations similar to our own in order to understand what we should do and to imagine what outcome we might expect. This case study has been supplied by the Australian Government in the Property and Financial Agreement and Consent Orders Guide issued by the Attorney-General’s Department.
Drago and Constance are separating. They have been together for 15 years and married for eight years. Drago works full time and earns $87,000 a year. Constance works part-time and earns $68,000 a year. They have two children aged six and four. Using the negotiation guide they arrived at the following negotiated property settlement and will seek a property consent order from the court:
Joint Assets and liabilities:
- Family home valued at $670,000 with a $250,000 mortgage. Net value $420,000.
- Family car #1 Subaru Forester valued at $24,000 with a $12,000 loan. Net value $12,000.
- Family car #2 Holden Commodore. Net value $8,000.
- Furniture. Net value $25,000.
- Joint savings account. Net value $15,000.
- Westfarmers shares. Net value $10,000.
- Joint transaction account. $1,200, with a $500 overdraft. Net value $700.
- Joint credit card. $8,000 in debt.
Individual Assets and liabilities:
- Drago Superannuation. Net value $300,000.
- Constance Superannuation. Net value $120,000.
- Drago savings account. Net value $20,000.
- Drago boat. Net value $5,000.
Identifying their contributions:
Both Drago and Constance have worked throughout the duration of their relationship. Since having children, Constance has worked part-time so that she can care for the children two days a week. She is also responsible for taking the children to and from daycare and school. While Drago and Constance try to share caring responsibilities for the children after work, Drago travels a lot for work, so Constance is often solely responsible for the care of the children. They also both acknowledge that Constance’s ability to earn superannuation was limited by extended periods of maternity leave and the fact that she has been working part-time. On the basis of Constance having the majority of child care responsibilities, she and Drago have agreed that that the property should be split with an adjustment in Constance’s favour.
Considering the section 75(2) factors:
Drago and Constance are both in their late 30s and are likely to be able to work until retirement. They agree that the children should live at each of their houses and acknowledge that Constance will likely have significantly more caring responsibilities than Drago. This will impact Constance’s ongoing ability to work full time. Taking this into account they agree that the property split should be readjusted to reflect Constance’s lost potential earnings.
Can I get divorced before the property settlement?
Under Australian law, divorce and property settlement or the division of assets are separate processes. You can apply for a divorce and finalise that separation prior to reaching a financial or property settlement agreement, and conversely, you can reach an agreement on property settlement before finalising your divorce.
Filing for a divorce is the process of two people separating from a marriage, and is done by completing divorce application forms and submitting them to the Commonwealth Courts Portal. Read Our Divorce Application Process In Australia blog for detailed instructions on who is eligible to apply for a divorce, and how to apply. If you’re unsure if you can apply for a divorce or how to proceed our experienced lawyers can assist you through the process.
Can I get divorced without a financial settlement?
You can file for a divorce without a financial settlement, however, you may find you are entitled to more than you think. It’s also advisable not to wait until you have divorced to start the process of dividing assets. The reason for this is that post-separation your asset pool may have changed, you may have acquired more assets or received an inheritance, for example, that may end up being divided between you and your ex-partner. Likewise, one of you may accumulate debt post-separation which can have a significant negative impact.
If your divorce is finalised before your financial settlement, you will have 12 months from the date of your divorce to commence a property settlement application or have your agreement finalised. If you wish to apply outside of this timeframe, you will need to seek permission from the court to do so.
Compared to financial settlement, filing for divorce is a straightforward process. As financial settlement is a more complex process, each party should seek out independent legal advice to ensure you are getting what you are entitled to. The division of assets may seem daunting and if you have an amicable relationship with your ex-spouse, you may feel you want to avoid a property settlement to avoid rocking the boat or to speed up the process to limit contact.
Our expert divorce lawyers have years of experience dealing in this process and can provide you with an obligation free consultation to give you an understanding of what you may be entitled to, and how to navigate the process delicately.
How long does a divorce settlement take?
The better understanding you and your ex-spouse have of each of your needs, the easier and quicker an agreement can be reached. If you agree on the division of assets, the settlement can take as little as two weeks to be finalised. If there are disputes, the process can take a matter of months when settled outside of court. If it needs to go to court, a case may take up to three years to be resolved.
Which assets are considered in a divorce?
It might surprise some couples what assets and liabilities are considered in a divorce, given that you often need to take into account assets brought into the relationship, acquired both separately and jointly during the duration of the relationship, and even assets and liabilities gained after the relationship ended. There are no set rules under Australian Law, and what is and isn’t considered can be decided on by the couple, the courts, or a combination of both.
Usually considered in the asset pool are:
- Properties owned both individually and jointly
- The respective income of each party
- The superannuation of each party
- Debts owing both jointly and individually
For more information on the contributions both financial and non-financial that are considered in a financial settlement, read the ‘Valuation of Assets’ and ‘Assessing the Contribution of Both Parties’ sections of this article above.
Are assets split 50/50 in divorce in Australia?
Most people think a 50/50 split of assets is the fairest outcome when they separate, however, this isn’t always the case. In fact, couples rarely settle on a 50/50 split. Under the Family Law Act 1975, there is no set percentage split, and every case will be different. That said, the most common division is a 60/40 split. This usually occurs when one partner earns more, while the other has more responsibility in looking after children post-divorce, or may have limited financial earning capacity, or less superannuation. The future needs and ability of each party to support themselves and their needs are the main factors that sway the percentage split, once all of the assets and liabilities have been assessed. For more examples on percentage splits, read the ‘What am I entitled to in a divorce settlement?’ section above.
How can I protect my assets from divorce?
There are a number of ways you can protect your assets. One of the four options couples have when splitting their assets is a binding financial agreement, which can be entered into at any time before, during or after your marriage.
When entered into before you get married, this is referred to as a prenuptial agreement. While some people think a ‘prenup is only used when the marriage is expected to fail, you can compare it to health insurance – most people don’t expect to fall ill, however, they still have health insurance. A binding financial agreement is a legal document that outlines how assets and liabilities would be divided in the event of divorce, and is final, meaning it can only be overruled by the court in special circumstances.
Another way to protect your assets is to start the financial settlement process as soon as you separate, rather than waiting for your divorce to be finalised, for example. This prevents any changes to the asset pool from being considered in the settlement, both positive and negative. An example of this might be if one party spends a large portion of the couple’s joint funds post-separation, or accumulates debt. On the other side, you may purchase a property, or receive an inheritance post-separation, which you do not want to be considered in the asset pool.
Can a divorce settlement be reopened?
If you have reached a financial agreement, however, are unhappy with the outcome once it has been finalised, you are able to make an application for property adjustment. After divorce, your application for the adjustment must be made within 12 months of your divorce being finalised. If you do not apply within this time limit, you will need to obtain special permission from the court.
If you are considering applying for a property adjustment, contact Peter Andrews Lawyers for an obligation free consultation and we can talk you through your rights and the process.