step 2: looking at each person’s contributions
property brought in at the start of the relationship - the court's procedure in deciding property settlement order
Once you’ve finished valuation, contributions to the relationship are assessed. The court looks at financial and non-financial contributions, and a division of the pool is made either using an asset-by-asset or percentage approach.
The court uses the Family Law Act to decide what would be an appropriate way to divide the pool at this stage. They look at financial and non-financial contributions, along with things that have been done by a homemaker and parent for the welfare of the family.
If you’re negotiating outside of the court, you don’t have to use these factors. But pay attention to them anyway –– if your private negotiations stall and you go to court, it’s important to know how the court considers property matters.
If you try to value contributions down to the dollar, you’ll end up with a headache. The court uses estimates when valuing contributions, and non-financial contributions don’t have a dollar value attached.
The global approach (looking at the assets and liabilities as a pool) is preferred by the court, but an asset-by-asset approach is also an option. With the asset-by-asset approach, contributions are assessed per asset rather than looked at as a whole.
Financial contributions - The court's procedure in deciding property settlement order
Once you reach this point, the court will look at how each party has added to the relationship between funds and assets.
Initial contributions are what you bring into a relationship. It could get tricky if you brought in much more (or much less) than your former partner, especially if the initial contributions are a notable part of the pool as a whole.
It’s unlikely that initial contributions will be returned to you or your former partner with mathematical accuracy unless the relationship was very short. Large initial contributions are given a lot of weight, but the court also considers how each party has contributed as a whole. Some other relevant factors include how each asset was used and how long the relationship was.
Money from parents - The court's procedure in deciding property settlement order
If your parents gave you money or gifts during the relationship, it'd count as a contribution on your part, unless it was meant to be a gift for both you and your former partner. If that’s the case, it’ll count as a contribution on both sides.
Damages - The court's procedure in deciding property settlement order
The fact that a party could sue for personal damages in the future is usually not relevant during a property case. If you’ve already received funds from an award for damages, the money (or what’s left) is treated like any other property. It’d be looked at as a contribution from your side unless your former partner can prove they helped you obtain the award.
Windfalls - The court's procedure in deciding property settlement order
Money from lottery wins or caused by market changes is looked at as a contribution from both you and your former partner.
Non-financial contributions - The court's procedure in deciding property settlement order
The Family Law Act explains non-financial contributions as anything that helped improve or conserve assets within the relationship. Any type of non-financial contribution may be relevant. If you’ve moved on and your current partner decides to get involved in the case, it is possible that contributions to both families can be looked at.
Homemaking and parenting are looked at when considering the well-being of a family, but it also can be viewed as a non-financial contribution if you did all of the housework and childrearing so your former partner could spend all of his or her time working and making money.
If you or your former partner gives a significant amount of time and effort to home improvements to increase the value of your home, that can be looked at as a non-financial contribution. Labour given by your parent or relative would also count in your favour
Contributions as a homemaker and parent - The court's procedure in deciding property settlement order
As we mentioned above, contributions as a homemaker could be counted as a non-financial contribution, or it could be considered while discussing welfare. The court looks at how each person contributed to the family’s well-being and to any children who resulted from the relationship. (Financial contributions to a different partner before or after the relationship in question are looked at during the third step.)
Rent payments after separation may be considered a contribution if the payments involve housing children from the relationship. Paying mortgage and rent after separating is usually considered a financial contribution, but it can also count as something that helps improve the welfare of the family.
Usually, the court looks at the financial and non-financial contributions after the relationship ended in an equal light. Thanks to the pension funds discussed in the two-pool approach, the possibilities of couples continuing to live together after separating, and the possibility that a trial could take a long time, the court now spends more time on each party’s contributions.
Forty years ago, the court decided against highlighting behaviour in divorce and property matters. However, conduct is again being discussed during property settlements. Poor choices aren’t used to judge someone’s morality, but if your poor choice stopped your former partner from making a financial or non-financial contribution, that will be considered.
This isn’t an everyday circumstance, but “special contributions” can complicate a case. If you or your former partner brought contributions to the relationship thanks to unusual talent, the court has to consider this.
A typical special contribution case involves one person making a lot of money thanks to business know-how or a special skill set, while the other person became a homemaker or stay-at-home parent. The court has to decide how to compare the significant financial contribution to the homemaking, which could have also been significant. Should you receive more at the end of a relationship if you contributed more due to your extraordinary talents?
We can look at JEL v DDF (2000) for guidance. During that case, the court was given the ability to take note of unusual contributions because of a person’s talent. Curiously enough, in a recent case involving about $22.5 million worth of assets and liabilities, the court weighed the homemaker and breadwinner’s contributions as the same.
You might look at this result and think that it comes from an egalitarian view, but concerns have been raised about its consistency. The court should not assume that contributions are equal and evaluate them separately in each case.
Examining financial and non-financial contributions
It can seem strange that the court focuses so much on establishing equality in the asset pool when the current law requires looking at financial and non-financial contributions differently. This is required by the second step of the process.
If you or your partner receive long service leave payouts, redundancy, or superannuation, the funds will be considered part of your payment. It’s expected that the non-financial contributions of the homemaker would match the value of the work payments.
Substantial increases near or after separation
While financial gains are usually looked at as contributions from both people, this changes if the gain happened near separation. Once a couple is no longer joined, their contributions can be viewed individually.
Farmer and Bramley (2000) is an example of this. In that case, most of the pool was money that the husband won after the couple separated. His wife received only 12.5 percent of the property pool. This usually applies to inheritances received near the end of a marriage or de facto relationship.
Step 3: Needs and resources