Property Division

The Four Step Process of Property Division

There are several principles that the Court may choose to apply when looking to apportion the property once a relationship has broken down. In accordance with the Family Law Act 1975 (the Act), the Court generally takes a four-step approach when dividing property in order to decide the percentage apportioned to each party.

Step 1: calculating the total pool of net assets

This involves identifying and valuing all the assets and liabilities of the parties. In most cases it does not matter whether assets are held in joint or sole names, providing that it can be established that the property was acquired or contributed to (financially or non-financially) during the relationship. On the same basis, it does not necessarily matter if the parties maintained separate bank accounts throughout the relationship, although a complete separation of finances in shorter relationships can have an impact on determining the appropriate division.

The assets which are included in the asset pool are those which were obtained or improved during the relationship such as superannuation, real property, businesses, trusts, shares, bank savings, household goods and effects, etc.

Similarly, all liabilities accumulated during the relationship must be included such as mortgages, credit cards, personal loans, outstanding tax debts or business debts, etc. Both parties are required by the Court to disclose all their financial assets and liabilities in order to properly establish the asset pool for the purposes of a property settlement.

After reviewing all the assets and liabilities, the Court will determine the value of the net asset pool available for distribution and may treat differently the non-superannuation asset pool as compared to the superannuation asset pool.

Step 2: assessing financial and non-financial contributions 

Once the asset pool has been established, the Court then assesses the financial and non-financial contributions that each party has made to the asset pool. These contributions can either be direct, financial contributions such as employment income or indirect, non-financial contributions, for example, personally undertaking renovations to the home.

The Court will consider any financial windfalls, such as inheritances, gifts or redundancies received by either party, as well as the financial position of each party at the beginning of the relationship. The Court also gives substantial weight to the non-financial contributions made by the homemaker and carer of the children.

Step 3: future needs & adjustments 

At the end of this stage, the Court will have determined a percentage division for each party. The Court will then consider the future needs of the parties. Broadly speaking, these are those needs which will impede the parties’ financial recovery following separation, such as each party’s respective earning capacity, health issues, the care of young children and the financial resources available to each party. The Court may make an adjustment in one party’s favour to allow for future needs. An adjustment is often made where one party has the majority care of young children, has significant future medical needs compared to the other party or a significantly lower earning capacity as compared to the other party.

Step 4: just and equitable considerations

The Court will consider is whether the division of property of the relationship is on a fair and equitable basis taking into account the totality of the circumstances. The Court will look at several factors, including the length of the relationship, in deciding whether the percentage division reached at the end of the third step would result in a fair and equitable distribution in the specific circumstances of the case. There is no rule and each case is considered based on its own merits.

The rules associated with property division can be complex, regardless whether an agreement can be reached or not. To ensure you achieve the best possible outcome, contact our lawyers at Alex Mandry Legal Group on 1800 329 090.

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