Property Settlements & Superannuation
A property settlement involves separating your financial affairs from your former partner so that you can move forward with financial freedom from one another. Parties can either agree on the settlement or have the Court determine orders for property settlement.
Many people misunderstand the principles of property settlement. Some falsely believe that settlements are always equal or that they have no entitlement to a property settlement if they did not bring property to the relationship. These are myths. In determining how the distribution will be made, the law does not only consider ownership or financial contributions but also takes into account non-financial contributions to a relationship, such as caring for children.
How is a property settlement determined?
Property includes a wide range of assets and financial resources, for example real estate, bank accounts and cash, motor vehicles, artwork, jewellery, trusts, business interests, inheritances, loans, debts, and superannuation.
A property settlement will include property that you entered the relationship with, property acquired during the relationship and property acquired after separation.
There is no set formula for the distribution of property in Australia and each property settlement is determined on the specific facts of each case. If your matter goes to Court, a number of factors will be considered, and these same steps should generally be followed when the parties negotiate a property settlement between themselves:
- the parties’ assets, liabilities, and financial resources
- the parties’ respective direct and indirect financial contributions
- the parties’ non-financial contributions to the relationship
- the parties’ future needs, considering their relative earning capacities, state of health, education, and responsibilities as primary carer of any children
- what is just and equitable in consideration of all the circumstances
When can I obtain a property settlement?
A finalised divorce is not required in order to proceed with the division of assets, and de facto couples are also eligible for property settlements under family law legislation. The following time limits apply for property applications made to the Federal Circuit and Family Court of Australia:
- for de facto partners, any court proceedings for a property settlement must be commenced within two years of separation
- after a divorce is finalised there is a twelve-month limitation period within which to bring court proceedings for a property settlement or spousal maintenance
Reaching your own agreement
Most family law property settlements are finalised without going to Court.
Even if a couple reaches their own agreement regarding the division of property, it is important that they obtain legal advice and have the agreement formalised. Informal agreements are not binding and cannot be enforced. There are also financial benefits of having a settlement formalised, such as property stamp duty exemptions. The financial and commercial consequences of a proposed property settlement must also be considered, particularly the taxation consequences on the proposed division of assets.
A financial agreement (known also as a binding financial agreement) is a written contract between the parties that may be used to formalise the division of their property without intervention of the Court. To be valid, the agreement must comply with certain formal requirements and both parties must receive independent legal advice.
Consent orders are orders granted by the Court upon application by the parties. They are often considered a more formal approach to finalising your property affairs and may, depending on the circumstances, be preferred over a financial agreement. The parties must make full disclosure in their application and, if the Court believes the proposed orders are just and equitable, they will be granted and made legally binding. You do not need to attend Court however it is important to receive legal advice before agreeing to consent orders to ensure that your rights are protected and that the proposed outcome is fair and reasonable.
Superannuation splitting
Superannuation is considered ‘property’ and the value of a couples’ super benefits will be taken into account when determining a property settlement. Court orders can be made dividing superannuation funds between a couple.
Super splitting can be complex. Before negotiations commence you should speak with your lawyer who can help you place a ‘payment flag’ on both parties’ superannuation accounts. This will prevent a party from withdrawing money from an account before it is valued.
Splitting superannuation does not necessarily convert the amount split into a cash asset. After the agreed amount has been transferred to a parties’ super account, it must remain there until a condition of release of superannuation is satisfied, for example preservation age reached, severe financial hardship or terminal illness.
When a shared lifestyle ends, it can be a complex process to determine how property is divided. Family law property settlements are not decided purely based on the legal ownership of assets or financial contributions of the parties but should also take into consideration other ways the parties have contributed and their future needs. It is also important to understand the financial consequences of a proposed settlement, for example, it may be more advantageous to hold onto one type of asset over another.
If you need assistance, contact us at [email protected] or call 02 6622 5566 for expert legal advice.