Beyond the divorce process itself and disputes over child custody, property division is one of the most important issues separating couples in Australia need to consider. Many people hope to secure the maximum property entitlements after divorce, and disputes of all kinds are not uncommon during this process. Drawing on the provisions of Australian law, this article sets out the principles that govern how property is divided after divorce.
*Because Australia recognises de facto relationships, everything said here about marriage and divorce also applies to the formation and breakdown of de facto relationships.
The Legal Basis for Property Division After Divorce
The division of a couple’s property is governed by the FAMILY LAW ACT 1975. After divorce, there are several ways property can be divided. The first is through a Binding Financial Agreement — in simple terms, an agreement signed by both parties setting out how their property will be divided. When the relationship breaks down, joint property is divided in accordance with that agreement. A Binding Financial Agreement can be negotiated and signed at any stage: before marriage, during the marriage, or after divorce. After divorce, property can be divided according to a valid Binding Financial Agreement that both parties have signed.
When Should a Financial Agreement Be Made?
If you want to settle property matters before formally entering the relationship, you can divide the property and sign a Binding Financial Agreement before marriage — this is what most people commonly refer to as a “prenuptial agreement”.
A financial agreement can also be signed during the marriage. Some people may not have thought much about it when they first married, then later learn that financial agreements exist and decide to sign one during the marriage — that is perfectly acceptable.
A financial agreement can also be made when a divorce is being considered or after it has already occurred. A couple may never have imagined that their marriage would one day end, but when that day comes and neither side wants the court to divide the property, they can reach an agreement privately and sign a financial agreement.
In Australia, divorce and property division are handled separately. Even after the divorce itself has been finalised, there is still a 12-month window to resolve property matters. So even if no preparations were made before the relationship broke down, the couple can still negotiate amicably and sign a financial agreement within 12 months of the divorce.
What Property Can Be Covered by a Financial Agreement?
The scope of property covered by a financial agreement is very broad. Beyond the usual assets such as cars, real estate and bank deposits, it can also include:
Shares, insurance policies, property inherited through family trusts, spousal maintenance, and more.
Property can also include negative assets — in other words, debts such as the mortgage on a home.
Is the Financial Agreement Valid?
When signing a financial agreement, it is not enough for the two parties to simply put their signatures on a document. A document of that kind is not a valid financial agreement. A valid financial agreement requires lawyers to be involved, and the two parties cannot share the same lawyer — each must have their own independent solicitor. This is because, before signing, both parties need to understand the rights and obligations the agreement will give them, as well as the advantages and disadvantages of signing, and they must obtain independent legal advice. In addition, each party’s lawyer must also sign a statement confirming that they have provided their client with legal advice about the agreement.
Can a Financial Agreement Become Invalid?
A financial agreement may be set aside. There are generally several situations that can cause an agreement to be held invalid:
1. The parties signed the agreement privately without engaging independent solicitors as required.
2. At least one party engaged in “non-disclosure of significant property”, such as failing to disclose a property they own.
3. Since signing the financial agreement, there has been a significant change in the parties’ circumstances — for example, the birth of a child; or a major life change after signing, such as one party developing a serious illness that affects their income or requires significant funds for treatment. In such cases, the court will usually lean in favour of that party because they need greater financial support.
4. One party was at a serious disadvantage when signing the financial agreement — for example, one party had poor English and was heavily dependent on the other party for their Australian visa and finances, and the other party took advantage of that to have them sign an agreement that was unfavourable to them.
5. One party was pressured or coerced into signing. An unfair financial agreement signed under such circumstances may also be set aside.
Without a Financial Agreement, How Is Property Divided?
If the couple has not signed and does not intend to sign a financial agreement, the court can divide the joint property for them. In making a property division decision, the court will primarily consider each party’s contributions and future needs. The first factor the court considers in dividing property after divorce is contributions.
Contributions include both financial and non-financial contributions.
Financial contributions are relatively straightforward. They refer to each party’s monetary input into the household — for example, who paid for the property, who repaid the mortgage, who covered day-to-day household expenses, and so on.
Non-financial contributions can include actions by either party that increased the value of joint assets. For example, one party carried out renovations and maintenance on a property, causing its value to rise. Non-financial contributions also include the effort each party put into caring for the family — for example, who did the cooking, cleaning, and looking after the children. In theory, non-financial and financial contributions have equal legal standing; neither is inherently more important than the other. From a practical standpoint, if the marriage was short (say two or three years), the party who contributed more financially will usually have a greater advantage in property division. If the marriage was very long, the court will generally treat both parties’ contributions as equal.
The second factor the court considers in property division: future needs.
The court will look at whether one party has greater financial needs. For example, if the couple has a baby who is not yet weaned, the baby will spend most of its time with the mother. By comparison, the mother will need to invest more effort and money, so she will have greater financial needs and may receive a larger share of the property.
As another example, in a long-married couple where the husband has been the breadwinner for years while the wife has stayed home running the household, the wife may have lost (or temporarily lost) her earning capacity through years of caring for the family and will not be able to return to work immediately after divorce. In that situation, the wife may also receive a larger share of the property, at the court’s discretion.
Special Circumstances:
Where one party has engaged in long-term family violence, the court may award a greater share of the property to the party who suffered the violence.
Where one party has recklessly wasted matrimonial property (for example, through gambling), such conduct may be regarded by the law as having caused financial loss to the couple. The property division proportions may be adjusted accordingly, with the court at its discretion awarding a larger share to the other party. The specific circumstances still need to be assessed by consulting a lawyer.
Final Thoughts
Property division on divorce is a rather headache-inducing matter. The whole process involves a great many details — such as financial disclosure, evidence of contributions made during the marriage, and proof of a de facto relationship. If both parties can calmly and without dispute divide their property in accordance with a financial agreement, that is the ideal scenario. In reality, however, there will almost always be some disputes. If the court is called upon to divide the property, then evidence of contributions becomes a key factor in how much property each party ultimately receives. When dealing with property division on divorce, everyone needs to be thorough and meticulous. If you have any questions, you are welcome to seek advice from our professional lawyers.
