Separation and divorce bring a range of legal and practical challenges, and the division of property is frequently the most complex and emotionally charged of them. The family law property settlement process in NSW is governed by the Family Law Act 1975 and applies to both married and de facto couples. It involves a four-step process that considers contributions, future needs, and what is just and equitable – not simply a 50/50 division of assets. Understanding how this process works is the starting point for protecting your interests in a property settlement.
Step One: Identifying the Asset Pool
The first step in any property settlement is identifying and valuing all the assets, liabilities, and financial resources of both parties. This includes the family home and any investment properties, superannuation balances, savings and bank accounts, shares and investments, vehicles, business interests, and personal property of significant value. It also includes liabilities – mortgages, personal loans, credit card debts, and any other financial obligations of either party.
Full and frank disclosure of all assets and liabilities by both parties is required by law. Failing to disclose assets is a serious matter that can result in the court revisiting a settlement or imposing penalties. Where there is reason to suspect that assets are being concealed, there are legal mechanisms available to compel disclosure, including court orders requiring the production of financial records and subpoenas to third parties including banks and business partners.
Step Two: Assessing Contributions
Once the asset pool is identified, the court considers the contributions made by each party to the acquisition, conservation, and improvement of the assets. Financial contributions include wages and salary brought into the relationship, assets owned before the relationship, gifts and inheritances received, and financial contributions to the costs of the household.
Non-financial contributions are equally recognised under the Family Law Act. These include homemaking and parenting contributions, which are not given lesser weight than financial contributions simply because they did not produce monetary income. A party who stayed home to raise children and manage the household made a contribution to the family’s financial position that allowed the other party to build their career and increase their earning capacity – and the Family Law Act explicitly requires this to be given appropriate weight in the assessment.
Step Three: Future Needs
After assessing contributions, the court considers the future needs of each party – the factors that will affect each person’s financial situation going forward. These include the age and health of each party, their income-earning capacity, the care arrangements for any children of the relationship, the financial needs and obligations of each party, and whether one party has significantly better employment prospects and earning potential than the other.
The future needs assessment frequently results in an adjustment from the contributions-based division. A party with primary care of young children, limited employment history because of the care role they performed during the relationship, or a health condition that affects earning capacity may receive a greater proportion of the asset pool to reflect their greater need going forward. This adjustment is not a penalty on the higher-earning party – it is a recognition of the practical financial circumstances each party faces after separation.
Step Four: Just and Equitable
The final step is the court satisfying itself that the proposed division is just and equitable in all the circumstances. This is a check on the overall result rather than a separate calculation – it asks whether the outcome of applying steps one through three produces a result that is fair when viewed as a whole. In some cases this step results in a further adjustment to ensure the total outcome meets the standard of justice and equity that the Act requires.
Superannuation Splitting
Superannuation is treated as an asset in family law property settlements but cannot simply be divided and distributed – it must remain in a superannuation environment. A superannuation splitting order divides a super interest between the parties, allowing the non-member spouse to receive a portion of the member’s superannuation benefit by having a new account created in their name with the same fund. The way superannuation is split, and whether it should be offset against other assets rather than split directly, depends on the specific circumstances of the matter.
Time Limits on Property Settlement
There are strict time limits for making property settlement applications that are frequently overlooked by separating couples. For married couples, an application must be made within 12 months of the date the divorce order becomes final. For de facto couples, the application must be made within two years of the date of separation. Making an out-of-time application requires the court’s permission, which is not always granted. If you are approaching either of these deadlines without a settled property agreement, seeking legal advice urgently is essential.
Contact McDonnell Schroder
McDonnell Schroder has assisted families in Western Sydney with property settlements for over 60 years. We offer a free first consultation and clear, practical advice on what a fair property settlement looks like in your specific circumstances.
Call us on (02) 9622 1155 or visit our Blacktown office to arrange your consultation.
