How do Courts decide how property is divided between the parties in a Property Settlement Application?

The main objectives of the court in determining a property settlement under the Family Law Act 1975 are to: “finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them” (s 81 FLA).

The four-step process which is followed in determining property division within a property settlement consists of the following steps:

1. Identification and valuation of assets.
2. Contributions of each party (financial and non-financial).
3. Additional Factors
4. The Just and Equitable requirement.

Identification and valuation of assets

The general rule is that all assets must be taken into account, whether they are acquired before or during the marriage or after the separation.

The definition of "property" is very wide. It includes almost everything of value. "Property" includes assets of either or both parties, such as real estate, shares, cars, jewellery, savings, furniture and effects. Superannuation is treated differently and, depending on the type and value of the fund, it may be divided (split) at the time that a property order is made.

The Court must also consider the financial resources of the parties. These can be funds or assets over which a party has influence or control or (in certain circumstances) prospective entitlements.

In ascertaining the net assets of the parties, valuation issues frequently arise.  Taxation (including capital gains tax), stamp duties and other issues also arise.    

Contributions of each party (financial and non-financial)

The next step is to assess each party's contribution to the marriage, both financial and non-financial, and also assess the contribution made as a homemaker or parent. Initial contributions (such as what you bring into a marriage) can be relevant as are gifts and inheritances and other "out of the ordinary" money received during the marriage.
 

Additional Factors

The next step is to assess the future needs of both parties, taking into account a range of things, including:

• age
• health
• income earning capacity
• the property of each party
• whether the party has the care or support of children
• the financial circumstances of any new relationship.

Where appropriate, an adjustment to the "contributions based" result can be made as a result of the consideration of those factors.
 

The just and equitable requirement

The final step is to consider the practical effect of any proposed settlement, to achieve a result that is just and equitable in all the circumstances.

For example, the court now has the power to split superannuation entitlements between separating spouses. The fourth step of the process will sometimes include a consideration of the appropriate blend of any settlement between immediately available assets, and deferred but important benefits such as superannuation.