NS Legal has previously analysed how property should be divided on divorce in Australia. [How is property divided on divorce/separation without a binding financial agreement?]

A common question many people face:

The divorce has been finalised, but the property has not been effectively divided. If one party then buys a house, acquires other assets, or even takes on new debts, can these newly acquired assets or liabilities be treated as joint property and divided?

The key point here is that the pool of assets to be divided is not assessed as at the date of divorce, but as at the date the parties obtain final court orders, consent orders, or sign a binding financial agreement. This means that both debts and assets acquired after the divorce may be included in the property pool.

In other words, for as long as the property has not been finally divided, any newly acquired assets and liabilities may still be brought into the pool and divided — even after the divorce has been granted.

Let’s look at several typical scenarios:

1. What about property acquired after divorce but before the property settlement?

Property acquired after the divorce but before the property settlement can be included in the property pool for division, up to 12 months after the divorce order. This means that, absent an effective property settlement, any property acquired by either party within 12 months after the divorce can be added to the pool and divided.

2. What about property acquired outside the 12-month property settlement window?

If the parties do not complete an effective property settlement within 12 months after the divorce, then, generally speaking, any property acquired more than 12 months after divorce or after the property settlement is completed will be protected and will not be divided with the former spouse. However, this is not absolute — a party may still apply to the court to divide property acquired by the other party more than 12 months after divorce. If the court considers the application reasonable, property acquired after the 12-month mark may still be divided with the ex-spouse. There is no bright-line rule for these exceptional cases; they are assessed on a case-by-case basis.

3. What if one party deliberately dissipates assets?

Deliberate dissipation of assets does occur. In one real case, the husband sold a taxi for $148,000 and spent all of the proceeds. The court found that the taxi had been a significant source of income for the family, so selling it prematurely amounted to wasteful conduct. The husband’s spending of the sale proceeds was reckless and unreasonable, and the court therefore added the value of the taxi back into the property pool for division. 

That is, if the total family assets were $150,000 plus the taxi, and the husband has now sold the taxi and squandered the proceeds, the actual remaining family assets are $150,000. The court ordered that the $148,000 sale proceeds be added back into the pool, so the pool is still treated as $150,000 + $148,000 = $298,000. If the parties divide 50/50, the wife effectively receives $149,000, while the husband effectively receives $149,000 − $148,000 = $1,000.

Let’s look at two illustrative cases:

Case 1

A Queensland couple ended a 35-year marriage and had two children. The husband was the primary income earner in the marriage; the wife was long the homemaker caring for the two children, with occasional part-time work. After two years of separation, the parties formally divorced in 2017, but were unable to agree on property division and ultimately took the matter to court.

The husband’s parents set up a small family trust in 1976 and invested in several properties in regional NSW. After the parents passed away, those properties were sold, generating net proceeds of approximately AUD 1.73 million. Control and beneficial entitlement in the family trust passed equally — one-third each — to the husband, his older brother, and his younger sister. Most of the annual income the husband had received from the family trust prior to the divorce had been spent on renovating the family home at the time.

After the wife’s mother passed away, she left AUD 100,000 each to her two grandchildren (i.e. the couple’s two children), and a property valued at AUD 225,000 was inherited by the wife. At the property-division stage, the wife argued that her inheritance should not be brought into the pool, that the husband had made no substantive contribution to the receipt or growth of that inheritance, and that the great majority of it should therefore go to her alone.

After hearing the matter, the Federal Circuit and Family Court held that an inheritance is not automatically excluded from the other party’s contribution claim simply because it was received by way of inheritance, nor is it automatically treated as a separate, protected category of asset assessed on its own. Rather, where the court — having assessed and tallied each party’s assets and respective contributions to the asset pool — finds that there are sufficient assets to achieve a relatively fair division and distribution, an inheritance received by one party may be treated as part of the common property pool in which that party is regarded as having made the dominant contribution and enjoyed the primary benefit, and weighed in the overall assessment. The court also had full regard to the fact that the husband had used his inheritance from his parents on activities that improved family asset values during the marriage, and that the two parties’ respective inheritances were roughly equal in size. On that basis, the court ultimately held that the wife’s inheritance from her mother should be included in the pool of matrimonial property and assessed and divided together with the rest.

Case 2

After Farmer and Bramley separated, the wife, Bramley, had care of their children under 18. Two years after separation, the husband, Farmer, won AUD 5 million in the lottery — the only substantial asset in their pool. In dividing the property, the court found that the wife had made a significant financial and homemaker contribution during the relationship, and, because she was caring for a minor child, her future needs also had to be weighed in the property settlement. The court held that the lottery winnings should not be retained by the husband alone and that the wife should also receive a share.

Because the ticket had been bought by the husband alone after separation, and the winnings had been received two years after separation, the court held that the husband should receive the majority of the prize and that the wife should receive 15% of the winnings.

In short, property acquired by one party after divorce can still form part of the asset pool. The pool is determined at the time of division, not at the time of divorce. This means that any asset or liability acquired after divorce and before the property settlement must be disclosed and may be divided.

It is therefore very important to resolve property issues as quickly as possible after separation. If you have decided to divorce but have not yet agreed on property division, you must apply to the court for property orders within 12 months after the divorce. For de facto relationships, the application must be made within two years after separation.

Final thoughts

Property division is one of the most pressing concerns for both parties on divorce. We recommend that separating couples seek legal advice as soon as possible after separation and formally divide their property, so that ownership of existing and future assets is protected and situations like those discussed above are avoided. If matters are left unresolved for a long time, assets acquired in the future may well end up being treated as joint property and divided.