Property settlement is the division of capital assets following the breakdown of a marriage or de facto relationship. Simply and broadly put, the legal steps involved in calculating the appropriate division of the assets are the same whether you were married or in a de facto relationship.

Under the Family Law Act, a court has very broad powers to make orders dividing the property of the parties to the de facto relationship or marriage. The court’s power can be exercised over any property that exists at the time that a court is considering the appropriate settlement. For example, this means that any property that one spouse owned before the commencement of the de facto relationship or marriage is included in the assets that a court can divide. There is also no "rule" that only the property that exists at the time of separation can be divided by a court. So if you acquire more property after your separation then a court can divide those assets with your former spouse or partner if it regards that as a just and equitable result.

A court’s power to redistribute property is not governed by specific rules of law but rather the court is given a broad discretionary power to make whatever orders are appropriate in the particular circumstances of the case. There is no one “right” answer to what the property settlement ought to be. There can be a range of answers available on the same facts that would all be "right" (ie, legally correct) but the approach of the lawyers and judge(s) involved can have an impact on how the property settlement is arrived at and the outcome you get.

The Family Law Act contains a number of provisions that guide a court in the exercise of its discretion which may be summarised as the following 4 step process.

1. 1. List and value the net property right now – what is there to divide?

   Determining whether property or financial resources are yours and whether they should be "in" or "out" for the purpose of calculating a settlement to your former spouse or partner can be complex. Even if an asset is “in” it is important that is valued on the right basis so any settlement is accurate and fair.

   As noted above, the general rule is that all property must be taken into account, whether the property is acquired before or during the de facto relationship or marriage including after the separation. This step requires each of the parties to make a full and frank disclosure of their respective financial circumstances at the commencement of their cohabitation and at the date of their final property settlement. A failure to make proper disclosure of a relevant matter can have very serious consequences.

   The definition of "property" is very wide. It includes almost everything of value to which a party is entitled, over which a party has control or which a party has the power to obtain. "Property" includes assets of either or both the parties, such as real estate, shares (including in private companies), cars, jewellery, savings, furniture and effects. Superannuation is treated differently and, depending on the type and value of fund, it may be divided (split) at the time that a property settlement 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. However, they can also include funds or assets that a spouse or partner does not have control over such as a Trust established by one of the parents of the spouse or partner. Importantly, the court has no power to redistribute financial resources between separating spouses as the court can only redistribute property between separating spouses.

2. 2. Look backwards and assess contributions to the net property right now in percentage terms– how did you get what you have?

   There is no automatic presumption of 50/50 in dividing the property that exists after the end of a de facto relationship or marriage. It is also not the case that because one person earned the money and the other person looked after the children then the person who has earned the money has made a greater contribution.

   This step in a court’s process requires a court to look backwards and assess the contributions made on behalf of each party to the relevant de facto relationship or marriage. Contributions are defined under the Family Law Act. They include financial and non-financial contributions to the property plus also contributions as a homemaker and/or parent.

   Assessing contributions is not a mathematical exercise. In many de facto relationships or marriages contributions are viewed as being equal even where there was a difference in earnings during the relationship. Assets that either partner or spouse had before the de facto relationship or marriage began can be important initial contributions that they should receive credit for in determining a fair property settlement. If one partner or spouse received an inheritance or gift during the course of the relationship then they also should receive credit for this in determining contributions.

   After assessing the contributions a court will award each person to the marriage or de facto relationship a percentage share of the assets for their contributions to the de facto relationship or marriage.

3. 3. Look forwards and think about whether one party needs an extra percentage share of the net property because of their “future needs” – what does the future look like?

   After assessing contributions the next step in calculating a property settlement is for a court to look into the future and assess the future needs of both parties to the marriage or de facto relationship. In assessing the future needs a court will taking into account a range of matters concerning each of the people to the marriage or de facto relationship that is broken down including:

   • their age;
   • their health;
   • their income and income earning capacity;
   • how one of the people to the marriage or de facto relationship has contributed to the income earning capacity of the other person;
   • their overall property and assets;
   • whether the person has the care or support of any children including arrangements that may be in place for the payment of child support;
   • whether the person has the duty to care or support any other adult;
   • the commitments of each person to care for themselves;
   • the financial circumstances of any new relationship that either of the people to the former marriage or de facto relationship may be in;
   • the standard of living that is reasonable in the circumstances (there is no automatic right or guarantee to maintaining the standard of living that people enjoyed in the past during the relationship – it's about what is “reasonable”).

    

   If as part of the consideration of the future needs a court is of the view that an adjustment should be made in favour of one of the people to the marriage or de facto relationship that has broken down then a court can award that person an additional share of the assets.

   It has often been said that the most important resource which a person to a marriage or de facto relationship that has broken down will retain is their capacity to earn income into the future and typically an adjustment can be made on account of this future income. For example, if the court has assessed contributions to the property as being 50/50 but is of the view that because the husband earns more income than the wife a court can give the wife an additional share of the property on account of this and the overall outcome could be 65/35 in the favour of the wife.

4. 4. Determine what order adjusting the net property right now is just and equitable.

   The final and fourth step of the property settlement process is to consider the practical effect of any proposed property settlement in order to achieve a result which is just and equitable in all of the circumstances. Typically this step will include a consideration of the appropriate blend of any assets between the two people to a marriage or de facto relationship that has broken down. This can be important where one person has a need for immediately available assets (such as the equity in the house) but there are other deferred but important benefits such as superannuation.

A Binding Financial Agreement is a form of contract under the Family Law Act. These contracts are a legal mechanism available to people in the following situations:

1. 1. before the marriage or de facto relationship commences (these types of agreements are often referred to as "pre-nuptials");
2. 2. during a marriage or de facto relationship that is still together (i.e. to re-arrange the property of you and your spouse or de facto partner even though you may not be separated or intending to separate);
3. 3. during a marriage or de facto relationship but after separation (ie, as a way of recording and formalising a final agreement as to property settlement and/or spouse maintenance between you and your spouse or de facto partner); and/or
4. 4. after separating and where a Divorce Order has been made for the end of the marriage (ie, these types of Agreements are also a way of recording and formalising a final agreement as to property settlement and/or spouse maintenance between former spouses only).

The legal point of a Binding Financial Agreement is that, if properly made, it replaces the legal ability of a court to deal with and make an order regarding the matters that are covered in the Binding Financial Agreement. For example, in a Binding Financial Agreement both people to a marriage or de facto relationship that has broken down can formally waive their legal ability to make a claim for maintenance from the other person in the future. This is a legal outcome with the highest form of certainty from future claims for maintenance into the future and the best way that this can be achieved is through a Binding Financial Agreement.

The rules regarding Binding Financial Agreements are technical and include a requirement for both people to have independent and separate legal advice in writing from a lawyer. In order for a Binding Financial Agreement to be legally effective then the requirements under the Family Law Act must be strictly followed. If the requirements are not followed then the Binding Financial Agreement could be seen as of no legal effect by a court meaning that the “door” for claims on the matters that the Agreement seeks to cover (such as property settlement and spouse maintenance) would be left "open".

Yes.

Section 31(2) of the Family Law Act provides the Family Court with an extra-territorial jurisdiction both as regards “persons” and “things” in broad, general language. Australian court orders are made against the individual (spouse or partner) or third parties (such as companies) and, as such, are of worldwide application (ie, the Australian court can make an order dealing with ownership rights in assets outside of Australia).

The power to adjust property interests operates in personam, i.e. against the party personally and not in rem, i.e. against the property. Thus, there is no impediment to taking foreign property into account or making Orders that the parties transfer or sell that property.

Enforceability of an Australian Order in the foreign jurisdiction where the assets or income are located needs to be carefully considered with advice from a local lawyer. However, it is also important that the Australian requirements under the Service and Execution of Process Act 1992 are followed.

Generally yes but it depends on the specific country and form of order.

Assuming a foreign Order for an amount of money payable under a property settlement needs to be enforced in Australia certain countries are specified in the Foreign Judgments Regulation 1992 and generally put this makes enforcement easier as it is possible to register the Order at the Supreme Court of NSW and then the foreign order is like a judgment of the Supreme Court of NSW. You can look up the countries listed in the Foreign Judgments Regulation 1992 here (scroll to the bottom):

www.comlaw.gov.au/Details/F2004C00005

Not every judgment of a country or state listed win the Foreign Judgments Regulation 1992 will be capable of registration in the Supreme Court of NSW so it is important to check the order with a lawyer.

It is not necessarily "fatal" if the order you need to enforce is: made by a country or state that is not listed in the Foreign Judgments Regulation 1992; not capable of being registered with the Supreme Court of NSW: or the order is about something other than an amount of money. None of the states of America are listed in the Foreign Judgments Regulation 1992 and family law orders can often require an event to occur (such as the sale of a house located in Australia) as opposed to payment of a specific amount of money. Appropriate judgments of a foreign court can be recognised and enforced under the “common law” and “equity” powers of the Supreme Court of NSW.

There are specific Rules about the registration and enforcement of a foreign order made about: the care of children, spouse maintenance ("alimony" in the USA), and child support/ child maintenance.

A final foreign order about the care of a child made in the countries and states specified as "prescribed overseas jurisdictions" in the Family Law Regulation 1984 can be registered and enforced in Australia by the Family Court. You can look up those countries and states here:

www.comlaw.gov.au/Details/F2013C00868/Html/Text#_Toc369093485

The foreign order can only be registered in Australia if the child or one of the parents or another person with rights in respect of the child is located in Australia.

The "prescribed overseas jurisdictions" are relatively limited and are mostly the USA states. Importantly and with the exception of New Zealand no counties from the Asia-Pacific are listed as "prescribed overseas jurisdictions". If you are proposing to enter into an order about a child in a country other than Australia or one of the “prescribed overseas jurisdictions” then it is prudent to consider entering into a “mirror order” in Australia. A “mirror order” is simply an Australian order that reflects what is being agreed in the foreign place under Australian law.

A foreign order about spouse maintenance, child support or child maintenance made in the countries and states specified as “reciprocating jurisdictions” in the Family Law Regulation 1984 can be registered and enforced in Australia. You can look up those countries and states here:

www.comlaw.gov.au/Details/F2013C00868/Html/Text#_Toc369093486

The process of registration and enforcement is mostly handled by Child Support, which is part of the Australian Department of Human Services.