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How does the Family Court decide a property split?

6th October 2020

how does the family court decide a property split? 

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Good morning

I often am asked this question by clients.
 
The first consideration is to look at the Family Law Act and the judgments the Court has made. The Court has determined that when considering property orders it must be done in accordance with Section 79 and section 75(2) of the Family Law Act 1975.
 
The considerations under section 79 are:
 
a. a determination must be fair considering all of the circumstances of the relationship;
b. the financial and non-financial contribution of the parties;
c. the contributions made as homemaker and childcaring;
d. the effect of any order on the capacity of a party to earn a living; 
e. the effect of child support upon a party; and 
f. the matters as set out in section 75(2).
 
The considerations under 75(2) are:
 
a. The health both physically and mentally of the parties in relation to be able to work to support themselves;
b. the income, assets and financial position of a party and whether he or she needs to bring up a child under 18 years;
c. the responsibilities of a party to support a person they have a duty towards;
d. whether the court should make allowances to enable a party to maintain a reasonable standard of living;
e. the debts of a party;
f. whether maintenance payments are required to allow a party to undertake education or training to allow them to obtain the skills to return to the workforce and the time that a party has given up employment to be a homemaker and parent;
g. whether there is a binding financial agreement;
h. any other fact that the court needs to consider to ensure a fair outcome.  
 
To enable the court to decide how to divide the assets of the marriage, the parties have an obligation to complete a financial statement setting out honestly and clearly, their financial position. This requirement is necessary for the court to perform its duties. It is always in the best interests of the parties to settle any property dispute where possible. In negotiation it is often not possible for either party to get what they want. The best result will be where both parties can live with a settlement and not have the court decide for them as they are the only persons who are fully aware of their situation. A court can only decide on the information that it has been given.
 
If the parties are unable to settle the matter after a pre-trial conciliation process then the parties will prepare for a hearing. Each party will file its evidence and then be reading to be cross examined by the other party’s lawyer. This can be harrowing and exhausting as each party will try to discount the other’s version of events. It is something to be avoided where possible.
 
The court in making its decision will proceed by a 4-step process:
 
1. Identify the net value of the property of the parties;
2. Consider the financial contribution of the parties both financial and non-financial such as child rearing and housework;
3. The superannuation entitlements of the parties, who will have care of the children and the financial commitments of the parties; and 
4. In all of the circumstances whether such orders are fair and reasonable.
 
The non-financial contributions such as housework and childrearing enable the other party to work and enhance their earning capacity. This contribution in all fairness must be considered. Another factor that must be considered is where one party has supported the family to allow the other to study to improve their earning capacity. In such circumstances, the financial contribution must be considered along with the greater earning capacity derived from that study.
 
The Court is able to consider property comprising the family pool either on a property by property basis or what is commonly called the erosion principle where assets are over time absorbed into the family asset pool, or both. Whilst time periods are not set in stone if your marriage or de fact relationship is:
 
i. about 5-6 years, often termed a short relationship, the erosion principle usually has minimal effect;
ii. about 7-12 years, often termed a medium relationship, the erosion principle usually has greater effect; and
iii. over about 12 years, often termed a long relationship, the erosion effect may have a defining effect.   
 
As each relationship is different, with different treatment of assets. It is only by examining the individual situation and how each asset was acquired and treated, can an estimate of how the court will treat the assets, can an assessment be made. This assessment must be only considered knowing the full circumstances surrounding the treatment of the asset. As each case is determined on individual assessment the court has on occasion considered eth erosion principle to have a great effect in what normally would be considered a short marriage whilst it has found in long marriages extending over decades the erosion effect to have minimal effect.
 
All in all it must be remembered that the Family Courts must in all of the circumstances must treat each relationship on its merits and achieve a fair and equitable result. It is a court of fairness as much as a court can achieve on the basis of the evidence that has been placed before it. 
 
If you or anyone you know is in a situation where property orders are required and need further advice, please do not hesitate in contacting me.
Kind Regards,
 
Jeffrey 
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