In Australia, many cohabiting partners apply for a de facto certificate, commonly known as proof of a de facto relationship, to establish that they are in a de facto partnership. Although a de facto relationship differs from a registered marriage, it still carries legal effect. In today’s complex social environment, the breakdown of a de facto relationship brings a range of unique challenges, particularly when it comes to property division. For members of the Chinese community, traditional views often mean many people are unaware that parties in a de facto relationship can also divide property. In such situations, property division becomes a matter that requires careful thought, weighing various factors and seeking a fair outcome. So when a de facto relationship breaks down, how is the couple’s property divided? Below we share the key aspects of property division to be aware of when a de facto relationship ends.

1. Be mindful of the time limit for property division

If a de facto relationship breaks down, the time limit for applying for property division is two years from the date the partners separated. This means you must apply to the court for a property division order within two years of the relationship ending. If more than two years have passed since separation, you will need the court’s leave before you can apply for property division.

When applying to the court for property division, you will generally need to show that you and your partner lived together for more than two years. However, in certain circumstances, even if you cohabited for less than two years, you may still be entitled to apply for property division, particularly where the following apply:

• You and your partner have a child together.
• You cared for another person’s child during the relationship, and you would suffer unjust hardship if the court did not make an order.
• You have made substantial financial or personal contributions, and without a court order you would not be adequately compensated.

2. What factors are considered in property division?

After a de facto relationship ends, property division is a complex process that requires careful handling. The following factors should be considered:

When the court divides property, it will consider both the financial and non-financial contributions each party made to the de facto relationship. For example, financial contributions often involve who paid more towards rent or the purchase of a home, who paid more towards daily living expenses, and who paid more for utilities such as water, electricity, gas and internet. Non-financial contributions are primarily reflected in the division of household labour, the care of children, and the level of commitment involved.

Financial factors considered in property division may include the following:

1. Major expenses: where one party has paid more towards the home deposit and mortgage, or covered more of the utilities and daily expenses, the court may award that party a larger share of the joint property.
2. Property division may involve tax implications. For example, if the sale of a particular asset between the partners would trigger capital gains tax, the tax consequences may need to be weighed during the division.
3. Division and management of joint accounts: partners in a de facto relationship may have set up joint accounts, for example to pay household expenses. When dividing property, the balances in these accounts may be taken into account to ensure a fair distribution.
4. If one partner is unable to work due to health issues while the other has a stable income, property division may prioritise the party requiring greater support.
5. Future earning capacity: consideration may be given to each partner’s future earning capacity, particularly if one party’s career prospects are more stable or their potential income is higher. This may require a larger share of assets or property interests to be provided in the division.

Non-financial factors may include the following:

1. Homemaking contributions: one party may have devoted more effort to caring for the household, such as maintaining the house and garden or caring for the children.
2. Children’s welfare: where there are minor children, property division may take into account differences between the parties in their obligations to care for the children.
3. Emotional attachments: partners may have emotional attachments to certain items of property, such as particular family heirlooms, gifts, or keepsakes. These attachments may affect how each partner views property division.
4. Family relationships: property division may be influenced by the relationships between the partners and between the partners and their extended families. For example, one partner may wish to retain a particular item of property to meet family expectations.
5. Mental health: property division can affect the partners’ mental health. The property settlement may therefore consider the mental health impact on each partner.

In addition, the length of the relationship also affects property distribution. If the parties cohabited for a relatively short period, more weight will be given to each party’s financial contributions in the property division. If the parties cohabited for a longer period, for example seven or eight years, the judge will, as appropriate, place greater weight on non-financial contributions. If cohabitation extended beyond ten years, in addition to financial contributions, non-financial contributions will be given even greater weight.

3. The process for dividing the share of property

The following is the general process for dividing property:

1. List the assets held in each party’s own name as well as those held jointly, such as houses, cars, businesses, investments and savings. Then list the debts in each party’s name and those held jointly, such as loans and borrowings.
2. Assess and value the assets to determine their current market value. This may include property valuations and financial asset valuations. Accurate valuation is essential for a fair division.
3. Consider the financial and non-financial contributions made by both parties during the de facto relationship, including household expenses, domestic work, and child care. These contributions may affect the weighting of the property division.
4. Distribute the joint property.

4. What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is a legal contract that can help parties in a de facto relationship avoid unnecessary property disputes after separation. A financial agreement generally sets out how property, debts, spousal maintenance, and other matters will be distributed between the parties. Before signing a Binding Financial Agreement, both parties should seek legal advice and assistance, and each party must have the agreement witnessed by their own lawyer at the time of signing.

Note: if one party conceals significant assets, any property agreement reached with the other party is likely to be overturned in the future, or held to be invalid.

5. Can a party apply for spousal maintenance?

After a de facto relationship ends, if one party is unable to support themselves and the other party has the financial capacity to provide support, the party in need may seek spousal maintenance from the other party. If the party paying maintenance later marries someone else or enters into another de facto relationship, they have the right to terminate the maintenance.

6. Can a party receive child support?

Regardless of whether either party later enters into a new relationship, if they are caring for the couple’s shared child, they are entitled to financial support from the other party. If the parties are unsure whether the child is biologically theirs, they may apply to the court for DNA parentage testing.

In addition, parties to a de facto relationship enjoy the same social security rights as parties to a legal marriage. Accordingly, after separation, if one party is raising the child on their own, they are entitled to receive social security and related welfare benefits.

7. Where the child lives and is raised after separation

Where the parties have a child together, after separation both should strive to fulfil their responsibilities and obligations as parents. This can be achieved through a Parenting Plan or by applying to the court for Consent Orders. If the parties cannot reach agreement on where the child should live, the court will determine the child’s living arrangements based on the best interests of the child. The court will set out how the parties are to raise the child, the time each party is to spend with the child, and related matters.

In closing

Although parties to a de facto relationship have not registered a marriage and are not in a legal marriage, a de facto relationship still carries legal effect to a significant degree. Applications for property division should be made as far as possible within two years of separation. Pay attention to the importance of a financial agreement, understand each party’s assets and debts, and recognise the importance of both financial and non-financial contributions in property division. In addition, when dividing property, you should seek advice from a qualified lawyer, who can assist with mediation, drafting and signing the agreement, and protecting your rights.

Property division is a taxing and relatively complex process, and along the way you may encounter a range of issues. We have published a series of articles on property division that you may wish to refer to:

Can superannuation be divided after divorce?

What to be aware of with property division in Australian divorce

Your partner cheated — can you claim a larger share of property in the divorce?

No source of income after divorce? You may be able to apply for spousal maintenance!