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How does the law determine property settlement?

When talking about property settlement, there are many misconceptions as to how property is actually divided after a relationship breaks down. The most common misconception is that there is an automatic 50/50 division of property between the parties. This is not in fact the case. In Australia, Property Settlement Orders are based on contributions made during the relationship and both parties’ future needs. The Court will only make an Order that it considers to be ‘just and equitable’, which is decided by requirements of the Family Law Act 1975 (Cth).

There are many things that must be considered in deciding who gets what property.  It may not matter whose name is on the document (such as a home title) or who bought an item or incurred the debt.  Even if you earn little or no income you can still be entitled to property from the property settlement.

A property settlement may involve property such as real estate, including (but not limited to) the family home, money held as cash or in bank accounts, investments, inheritances, shares, superannuation and any other assets such as cars, furniture and jewellery.  Liabilities that are taken into consideration include mortgages, loans, credit cards and personal debts.

When deciding who gets what from the property settlement, there is a four-step process that is adopted under the Family Law Act.

Step 1

The first step is to identify and value all property of the relationship (including debts).  This property can include things you got before the relationship commenced or even after the relationship has ended.

Step 2

The second step is to take into account what each person has given to the relationship (contributions) including (but not limited to) earnings, savings, gifts, inheritances, property owned before the relationship, improvements to property and contributions as a homemaker.

Step 3

The third step is to then consider the other factors set out in the law, including (but not limited to):

  • how much money each person could earn in the future;
  • the age and health of each person;
  • the responsibility for looking after other people; and
  • the length of the relationship.

Step 4

The final (fourth) step is to consider what is ‘just and equitable’ (fair) to both parties.  To decide what a fair division of property is, the law looks at all of the things mentioned above.  The law does not look at who left the relationship.

Whilst property settlement is just one part of the family law process, we hope this information helps to dispel any myths in relation to the assumed division.

For more information on property settlement, divorce or other family matters, please contact our office for a free initial consultation.

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