When going through a divorce in Australia, alongside the divorce process itself and disputes over child custody, property settlement is one of the most important issues both parties will face. Many people hope to secure the greatest possible share of the property after divorce, and disputes of all kinds are common throughout the process. This article draws on the provisions of Australian law to walk you through the topic of property division after divorce and explain, in detail, the principles that govern how property is divided.

*Because Australia recognises de facto relationships, the discussion in this article about marriage and divorce also applies to the formation and breakdown of de facto partnerships.

The Legal Basis for Property Division After Divorce

Division of a couple’s property is governed by the Family Law Act 1975 (Cth). After separation, there are several bases on which property can be divided. The first is a Binding Financial Agreement (property settlement agreement) — put simply, a written agreement in which the two parties set out how their property will be divided, so that when the relationship breaks down, the joint property is shared out in accordance with the agreement. This kind of agreement can be negotiated and signed before marriage, during the marriage, or at any stage after separation. Once the relationship has ended, property can be divided according to the valid Binding Financial Agreement the parties have already signed.

When Can a Binding Financial Agreement Be Made?

If you want to sort out property matters before formally entering the relationship, you can divide up the property and sign a Binding Financial Agreement before marriage — this is what most people refer to as a “prenuptial agreement”.

A Binding Financial Agreement can also be signed during the marriage. Some people may not have given the matter much thought when they first got married, and only later learn that such agreements are available; signing a Binding Financial Agreement during the marriage is perfectly acceptable.

You can also make a Binding Financial Agreement when contemplating divorce or after the divorce has occurred. A couple may never have imagined their marriage would end, but once that day arrives and neither party wants the court to decide how the property should be divided, they can reach a private agreement on property division and sign a Binding Financial Agreement.

In Australia, divorce and property settlement are dealt with separately. Even after the divorce itself has been finalised, you still have 12 months to resolve property division, so even if nothing was put in place before the relationship broke down, the parties can still negotiate amicably and sign a Binding Financial Agreement within the 12 months following the divorce.

What Kinds of Property Can Be Covered by a Binding Financial Agreement?

The scope of property that can be covered is very broad. In addition to the more common assets — cars, real estate, bank deposits and the like — it can also include:

shares, insurance policies, property inherited through a family trust, spousal maintenance, and more.

Property can also include negative assets, that is, debts such as the mortgage on a home.

Is a Binding Financial Agreement Valid?

Signing a Binding Financial Agreement is not as simple as the two parties putting their signatures on a document between themselves — such a document will not be a valid Binding Financial Agreement. A valid agreement requires the involvement of lawyers, and the parties cannot share the same lawyer: each must have their own independent solicitor. This is because, before signing, each party needs to understand the rights and obligations the agreement will create and the advantages and disadvantages of entering into it, and to receive independent legal advice. On top of that, each party’s lawyer must also sign a statement confirming that they have provided their client with legal advice about the agreement.

Can a Binding Financial Agreement Be Set Aside?

A Binding Financial Agreement can be set aside. The following are some of the situations in which an agreement is likely to be found invalid:

1. The parties signed the agreement privately between themselves, without engaging independent solicitors as required.
2. At least one party has engaged in “failure to disclose significant property”, for example not disclosing a piece of real estate they own.
3. Since the Binding Financial Agreement was signed, there has been a significant change in the parties’ circumstances, such as the birth of a child; or there has been a major change in life circumstances after signing, for example one party has developed a serious illness that affects their income or requires substantial funds for treatment — in such cases the court will usually lean in favour of that party, because they need greater financial support.
4. At the time the Binding Financial Agreement was signed, one party was in a position of serious disadvantage, for example one party had limited English and was extremely dependent on the other for their Australian visa status and financial support, and the other party took advantage of that to have them sign an agreement that was unfavourable to them.
5. If one party signed only under pressure or duress, such an unfair Binding Financial Agreement may also be set aside.

How Is Property Divided Without a Binding Financial Agreement?

If the parties have not signed and do not intend to sign a Binding Financial Agreement, they can ask the court to divide their joint property. When making a property settlement decision, the court will typically focus on each party’s contributions and future needs.

The First Factor the Court Considers in Divorce Property Settlement: Contributions

Contributions include both financial and non-financial contributions.

Financial contributions are relatively straightforward — these are the monetary contributions each party has made to the family, such as who paid for the property, who paid off the mortgage, and who covered the household’s day-to-day expenses.

Non-financial contributions can involve conduct by either party that has increased the value of jointly owned assets. For example, one party may have carried out renovations and maintenance on a property, resulting in an increase in its value. Non-financial contributions can also include the effort each party has put into caring for the family — for example who did the cooking, cleaning and looking after the children. In theory, non-financial contributions carry the same legal weight as financial contributions; one is not ranked above the other. In practice, however, if the marriage has been relatively short (two or three years, for example), the party who has made greater financial contributions will usually have a stronger position in the property settlement. Where the marriage has been very long, the court will generally treat the contributions of both parties as roughly equal.

The Second Factor the Court Considers in Property Settlement: Future Needs

The court will consider whether one party has a greater financial need. For example, if the parties have a baby who is still being breastfed, the child will spend most of the time with the mother; by comparison, the mother will need to dedicate more effort and money to the child’s care, so she will have greater financial needs and may receive a larger share of the property.

Take another example: a couple who have been married for many years, in which the husband has been the main breadwinner while the wife has looked after the household. Because she has spent a long time caring for the family and has not been in paid employment, she has lost (or temporarily lost) her capacity to work and will not be able to return to the workforce immediately after the divorce. In this kind of situation, the wife may likewise receive a somewhat 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 the party affected by the family violence a larger share of the property.

Where one party has wantonly wasted matrimonial assets (for example through gambling), such conduct may be treated by the law as having caused financial loss to the couple, and the court may adjust the proportion of the property settlement, at its discretion, to give the other party a larger share. The specific outcome will still depend on the circumstances, so it is important to consult a solicitor.

Final Thoughts

Property division after divorce can be a real headache, with many details involved throughout the process — financial disclosure, evidence of contributions made during the marriage, proof of a de facto relationship, and so on. If both parties can remain calm and divide the property in accordance with a Binding Financial Agreement without any disputes, that is the ideal outcome. In real life, however, there will always be some disagreement. If you need the court to divide the property for you, the evidence of contributions will be the bargaining chips that determine how much each party ultimately receives. Everyone should approach property settlement after divorce carefully and thoroughly, and if you have any questions, you are welcome to seek advice from our experienced solicitors.