Dividing Assets in Divorce in Australia: What You Need to Know

Divorce is never easy, and dividing assets in Australia can make things even more complicated. What often surprises people is that there's no clear-cut rule, such as a 50/50 split, when dividing property after separation. Instead, Australian law requires a just and equitable division, which can mean different things depending on individual circumstances.

What is "Property" in Divorce?

When it comes to divorce, property isn't limited to just real estate. It includes everything from savings, investments, and superannuation to household items, cars, and even family pets. Essentially, if it has value, it can be considered part of the property pool to be divided.

Steps to Divide Assets: The Legal Framework

In Australia, there’s a clear, structured process for determining how to divide assets in a divorce:

1. Identify all the property: Both parties must disclose all their assets, liabilities, and financial resources. This includes both joint and individually owned property. Failure to disclose can lead to penalties or even the invalidation of an agreement.

2. Consider the contributions: The court will look at what each person brought into the relationship. Contributions are divided into financial and non-financial contributions. Financial contributions include salary, savings, and inheritances, while non-financial contributions cover homemaking and child-rearing.

3. Future needs: The court will also consider each person's future needs. For instance, if one partner will have custody of the children, they may receive a greater share of the assets to support the family. Similarly, factors like age, health, and ability to work will be assessed.

4. Just and equitable division: The court aims to reach an outcome that is just and equitable. This doesn't necessarily mean equal. Instead, it reflects what is fair, given the contributions and future needs of both parties.

How Does Superannuation Fit into the Picture?

Superannuation, or retirement savings, is treated as property in a divorce. This can be a significant portion of the assets, especially in long-term marriages. Depending on the circumstances, superannuation can either be split between the parties or allocated to one party while balancing the division of other assets.

Negotiating Without Court: Consent Orders and Binding Financial Agreements

Many couples prefer to avoid court and negotiate the division of assets through mutual agreement. There are two main legal avenues for this in Australia:

• Consent Orders: If both parties agree on how to divide their assets, they can apply for Consent Orders. This formalizes the agreement and makes it legally binding.

• Binding Financial Agreements (BFAs): A BFA is similar to a prenuptial agreement and can be made before, during, or after a marriage or de facto relationship. It details how assets will be divided in the event of separation. BFAs must be drafted with the assistance of a lawyer to ensure that both parties have received independent legal advice.

What Happens When You Can't Agree?

If couples cannot agree on how to divide their assets, the matter will go to the Family Court or Federal Circuit Court. It can take months, even years, for cases to be heard, which is why many people try to reach an agreement outside of court. The legal process is not only time-consuming but can also be expensive.

Special Circumstances: De Facto Relationships

It’s important to note that the same laws apply to de facto relationships, provided the couple lived together for at least two years or had a child together. If you're in a de facto relationship, you can also apply to the court to divide assets.

Real-Life Example: A Case of Complexity

Let’s take a look at a real-life case. Sarah and Tom had been married for 15 years. During that time, Tom built a successful business, and Sarah was the primary caregiver for their two children. When they divorced, Sarah initially thought they would split everything 50/50. However, after going through mediation, Tom and Sarah agreed that Sarah would receive 65% of the assets, considering her contributions to the family and Tom's higher earning capacity in the future. They avoided going to court by negotiating a Consent Order.

This case highlights that a fair division of assets doesn't always mean an equal division. It's about acknowledging the contributions and needs of both parties.

Do It Yourself or Hire a Lawyer?

In Australia, there’s an increasing trend toward DIY divorces, especially for couples who have an amicable separation. However, dividing assets can become tricky, and if the property pool is large or complex, legal advice is crucial. Without legal guidance, you might miss out on entitlements or end up with an unfair division.

Lawyers can help navigate the complexities of divorce settlements, draft binding financial agreements, or even represent you in court if necessary. However, lawyer fees can be high, especially if the divorce becomes contentious.

Property Settlements and Taxes

It’s also important to consider the tax implications of divorce settlements. Transferring property, superannuation, or other assets can trigger tax liabilities, such as capital gains tax. However, under Australian law, some exemptions may apply, particularly if the transfer is part of a formal divorce settlement.

Top Tips for a Smooth Property Settlement

1. Disclose everything: Full disclosure is essential to ensure a fair division of assets. Failure to do so can lead to penalties and the invalidation of any agreement reached.

2. Consider future needs: Don’t just look at the here and now. Consider your future financial needs, especially if you have children or if there’s a significant gap in earning potential between you and your partner.

3. Stay calm and objective: Divorce is an emotional time, but when it comes to dividing assets, it’s essential to stay calm and objective. Letting emotions drive decisions can lead to unfair settlements or costly legal battles.

4. Get legal advice: Even if your divorce is amicable, it’s worth getting legal advice to ensure you’re protected and that the settlement is fair.

Conclusion

Dividing assets in a divorce can be one of the most challenging aspects of separation. The key is to approach the process with a clear mind, be transparent, and seek legal advice when necessary. By understanding the steps involved and considering your future needs, you can work toward a fair and equitable settlement that allows both parties to move forward.

Remember, every divorce is different, and the division of assets will depend on your unique circumstances. The goal is to reach a solution that works for both parties, whether through mutual agreement or court intervention.