When couples separate, the question of how their property is distributed usually comes to the fore. Particularly in circumstances where separating parties have built their life together and have bought and accumulated assets jointly, property settlement can be complicated.

Can the court divide interests in property?

Under s 79 (for former spouses) and s 90SM (for de facto couples) of the Family Law Act 1975 (Cth), the Family Court can order the alteration of interest in property between former couples. This means, that the court can order certain parties have title to property even if they did not own that asset during the relationship, such as a home or car purchased in the name of one party.

The court does not issue these orders arbitrarily, but instead will not make an order altering property interests “unless it is satisfied that, in all the circumstances it is just and equitable to make the order” (s 79(2)/90SM(3)).

What property interest can be altered?

Under s 4(1) of the FLA “property” is defined as property which either party, or a party is, entitled to, whether in possession or reversion. In addition to realty and personal property, common law cases in relation to this issue have concluded that “property” also includes any of the following: a claim in proprietary estoppel, funds held on fixed trust, funds held by the pubic trustee as administrator for disable persons, any surplus property after payment of creditors and the costs of administration of a bankrupts estate, an option to purchase property, an interest in a partnership, a prospective inheritance where the testator has lost testamentary capacity since making the will, and future royalty income streams arising from membership of an entertainment group.

In relation to trusts, where the trust is essentially under the effective control of one of the parties, sometimes referred to as “sham” trusts, the trust will be considered property of that party and therefore capable of alteration by order of the court (Kennon v Spry). This finding is dependent on the party having effective control over the trust, which typically occurs where they are the sole trustee, and where they are also the capital beneficiary of the trust.

What is considered when making just and equitable orders?

The court will consider a wide variety of factors according to the circumstances of the case when considering property orders. Under the FLA the court will consider:

  • Financial contributions by either party (s 79(4)(a)/90SM(4)(a)): this includes contributions made directly or indirectly by or on behalf of a party to the acquisition, conservation or improvement of any of the property of the parties.
  • Non-financial contributions (s 79(4)(b)/90SM(4)(b)): this involves consideration of non-financial contributions to property such as where a party provides inspiration or support to the financial success of their spouse.
  • Contributions to the welfare of the family (s 79(4)(c)/90SM(4)(c)): this involves consideration of the contribution made by either party to the welfare of their family including any children to the relationship. These types of contribution will inevitably vary depending on the personal circumstances of the relationship and its nature.
  • The effect of orders on earning capacity (s 79(4)(d)/90SM(4)(d)): the court will consider the effect of any order on either party’s earning capacity.
  • Any other factors which are relevant under s 75(2) https://www.legislation.gov.au/Details/C2019C00101

Generally, the court will evaluate the contributions of each party by a global approach. This entails a wholistic assessment of each parties’ contributions after consideration of the whole property pool rather than considering contributions to each specific asset within that pool. However, in some instances the court may decide to evaluate each parties contribution to particular assets (the assets-by-assets approach) when it considers this appropriate.

What about assets obtained prior to or after the relationship?

There are no temporal limitations imposed by the court under the FLA. Consequently, contributions that are made either before the commencement of the relationship or after the breakdown of the relationship may be considered if the court finds it appropriate to do so. Whether the court will consider the prior or post relationship contribution is determined by the court itself but may be appropriate where for example, prior assets are used as a “springboard” to the wealth of the relationship, or an inheritance or windfall is received very shortly after the termination of the relationship.

What about gifts given to me?

In relation to gifts, there is general presumption that the gift is regarded as a contribution made on behalf of the party who receives the gift (Gosper). However, the court may examine the intention of the donor to ascertain whether the gift was intended as gift to the couple or merely one of the parties. For example, a gift from parent to child is presumed to be given to the child solely and thus is the child’s contribution (Kessey) but if a contrary intention is shown, such as where a wedding gift was intended to benefit both parties, that gift will be considered a joint contribution.   

If you require legal advice in respect of your relationship and your legal obligations and rights under the Family Law Act please contact Hansons Lawyers on 42 222 666 or by email at hansons@hansonslawyers.com.au