The Family Law – Property Settlement ProcessThe Family Court System in AustraliaApplicable LawsThe Australian Constitution divides power between the States and the Federal (Commonwealth)governments. The Federal parliament has the power to pass laws affecting the whole of Australia onspecific subjects defined by the Constitution, this includes the area of family law.The Family Law Act 1975 was passed by the Federal parliament and applies to the whole of Australia. Itcovers all aspects of family breakdown including separation and divorce, property settlement followingmarriage breakdown, spousal maintenance and child care issues. It relates to the parenting of childrenregardless of whether the parents were married or not. Some areas of family law are however still governedby State parliaments.Please note: Property disputes between de facto couples are governed by separate State Laws and arenot covered in this paper.Applicable CourtsThe Family Law Act set up two Family Courts, The Family Court of Australia and the Federal MagistratesCourt. The practice and procedure of these Courts are contained in the Family Court Rules 2004 and theFederal Magistrates Court Rules 2001. The majority of applications can be filed in either Court howeverthe Federal Magistrates Court does not have powers to deal with adoption, property disputes when thevalue is over $700,000 (except with the consent of both parties) and issues concerning the validity of amarriage. Applications for divorce should be filed with the Federal Magistrates Court. The FederalMagistrates Court aims to provide a quicker, cheaper service.In practice, straightforward applications which can be determined at the first hearing date should be filedwith the Federal Magistrates Court. Your solicitor will be able to advise you on the most suitable venue foryour case.The Child Support Agency governs all applications for financial support for children born on or after1/10/89, children whose parents separated after 1/10/89 and children whose siblings were born after1/10/89.The approach taken by the CourtsThe Courts apply basic principles contained in the Family Law Act which encourages parties to reachagreement without the need for a Court hearing. Except in limited circumstances, parties are required todemonstrate that they have tried other ways of resolving their differences before seeking the intervention ofthe Courts. There are very good reasons for this. Family breakdown is a difficult and stressful time for allconcerned, particularly children. Courts encourage the amicable settling of family affairs to save time,expense and further distress. Legal fees can be expensive and Court proceeding are often time-consumingand stressful for all concerned. If parties can reach mutual agreement then arrangements can be put in placemuch more quickly thus reducing the period of uncertainty and enabling parties to get on with their lives. Amutual agreement has the advantage of making the participants feel that they have had some say in thedecision making process rather than waiting for a Court decision. Agreements are far more likely to beadhered to if reached amicably and without resentment.In the event that an application is lodged, Courts are not concerned with apportioning blame but rather withfinding workable and fair solutions. For this reason the principle of the no-fault divorce was established andthe only ground for divorce in Australia is the irretrievable breakdown of the relationship which must be
demonstrated by a 12 month separation. Courts make decisions on applications involving children on thebasis that the best interests of the child is the main consideration.The need for legal adviceBefore making any decision about whether to consult or hire a solicitor, it is important to think carefullyabout your goals. The purpose of this kit is not to provide specific legal advice but to provide usefulinformation to enable you to make informed decisions.Your time (and money!) will be better spent with a solicitor if you have some idea of your options and whatyou would like to achieve. To that end AussieLegal can assist with a number of ancillary services (seeFurther services below).Why is a solicitor necessary?Decisions made after the breakdown of a relationship especially where children or finances are involvedcan have a huge impact on your future happiness and welfare. It is important to obtain the advice of anexperienced solicitor to protect your legal rights and financial interests. Solicitors are better placed toachieve your goals and can navigate you through the legal procedures involved which can seemcomplicated and confusing. A solicitor can also advice you on what you can realistically achieve.Choosing and appropriate solicitor can be a difficult task, however.How soon should I consult a solicitor?Once you have considered the issues and made the decision to seek legal advice, the answer is as soon aspossible. The rules both in the Family Court and Federal Magistrates Court have now imposed deadlineswhich must be compiled with. You will need to provide quite a bit of information for your solicitor and heor she will need time to prepare your case properly. You may also find some peace of mind by getting theball rolling and trying to resolve issues as quickly as possible particularly when there are children involved.Property Settlement CalculatorA financial settlement means the division of a married couple’s financial resources on separation.The Family Law Act 1975 sets down the applicable law in relation to the division of property or liabilities(debts) of people who have been married. However, if you have never been married, the appropriate lawswhich govern your financial situation are the laws of the State where you live.The meaning of propertyProperty can include your home, any other real estate, funds in banks, building societies, credit unions ofother financial institutions, investments, life insurance policies, an interest in a business, householdcontents, any other personal property and Superannuation.“Property” means the property to which a party to a marriage is entitled whether in “possession” (whichmeans entitled to it now) or “reversion” (which means entitled to it at some later time).IMPORTANT: It makes no difference in whose name property is held. Property held by either party toa marriage comes within the definition of matrimonial property and will be taken into account by the Court.It may be relevant however whether the property is question was acquired before during or after the periodof the marriage but this will be discussed below.The powers of the Family Court
The Family Court has wide powers to make orders altering the interests of parties of a marriage to propertyof the parties to a marriage. This will determine how your property, financial resources and debts shouldbe shared between you.Who can make an application?The applicant (that is the person applying) and the respondent (that is the other party) must be parties to themarriage. That means they must be married, be separated or be divorced. It also includes parties to amarriage that has been declared void.At least one of the parties to the proceedings must be present in Australia when the application is filed, or atthat time be an Australian citizen or resident.The Family Law Act was recently amended to allow a creditor or any other person who may be averselyaffected by the making of a financial settlement order to become a party to proceedings. This could includeany children to the marriage.The timing of the applicationApplications for financial orders can be made at any time following separation. There is no requirement towait until 12 months have elapsed. However, once an application for divorce has been made and a decreeabsolute dissolving the marriage ordered, parties have only 12 months within which to make an applicationfor property settlement and/or spousal maintenance (the subject of the following section). In limitedcircumstances, the Court may give you permission to apply outside this time limit but you would need tosupply an affidavit (sworn statement) setting out reasons why the application was made late. You shouldnot assume that this permission would be granted. This 12 month time limit also applies to orders made byConsent.The importance of reaching agreement where possibleParties are encouraged to reach agreement as to how divide their property and liabilities (if any) whereverpossible. You will avoid costly legal bills and have some certainty about the outcome of your negotiations.This is a very complicated area of law and each case is different. It is difficult to predict with any degree ofcertainty the exact outcome of any application you may make. The Court is obliged to consider a numberof factors in reaching a decision and can exercise a considerable amount of discretion in reaching adecision. You are likely to face a period of uncertainty whilst waiting for the decision of the Court. If youare unable to reach an agreement, the Court will be able to refer you to professional agencies who will beable to assist you in negotiating an agreement. If you are able to reach an agreement, it is possible toformalise that agreement and make it binding by applying to the Court for a Consent Order. The Court willneed to be satisfied that the order is properly drafted and that the terms are “just and equitable”. If you dofile an application, you will be required to demonstrate that you have followed the pre-action proceduresdescribed in previous chapters.The need for legal advice
The decisions you make about property settlement are some of the most important financial decisions youcan make. You may be under considerable emotional and financial stress when your marriage breaksdown. If you try and negotiate a settlement without the benefit of legal advice you may find that yourcontributions to the marriage are not fully recognised and your welfare needs are not fully met. Parties cansometimes experience a drastic fall in living standards when they divorce. In practice single mothers andolder women are particularly vulnerable.This is a complicated area of law and it is important to be fully informed about your rights. Whilst it isdifficult to predict the exact outcome at Court, an experienced solicitor will be able to give you someguidance about what to realistically expect drawing on experience in negotiating settlements andconducting trials. This is turn may assist you in negotiating an agreement, protecting your interests andavoiding the legal costs associated with a Court hearing.Effect of a pre-nuptial agreementSome couples decide to make a legally binding agreement about their financial arrangements in the eventthat the marriage breaks down. These agreements can be made before marriage, during marriage or afterseparation. The legal term for these agreements is ‘financial agreements’. To be legally binding, theseagreements must be signed by both parties and both parties must have sought independent legal andfinancial advice. Courts can declare these agreements to be invalid if the conditions mentioned were notmet, there is evidence of fraud, they were entered into for the purpose of defeating legitimate creditors, orthe circumstances have changed making the agreement impracticable.What to do if you believe that your spouse may be seeking to hide or sell property?Parties have a duty to make full and frank disclosure about their financial situation. You should consultyour solicitor if you believe that your spouse is not complying with this requirement. Any orders made bythe Court may be set aside or varied in the event that parties fail to make full disclosure. If you believe thatyour spouse wishes to sell property, you can apply for an Interim Order prohibiting the sale of assets until afinal settlement has been reached.Superannuation Splitting Laws effective as of 28 December 2002The Family Law Legislation Amendment (Superannuation) Act 2001 (FL Super Act) provides for thepayment splitting of a superannuation interest. Under the superannuation splitting laws, superannuationinterests are treated as property for the purposes of property settlement on marriage breakdown. This meansthat people are able to make an agreement - known as a superannuation agreement - about how anysuperannuation interests that either party has are to be split in the event of marriage breakdown.A superannuation agreement is like a more general financial agreement in which people can agree abouthow property other than superannuation is to be divided on marriage breakdown. However, becausesuperannuation interests are different to other property, there are special rules about what a superannuationagreement has to say.Provided that a superannuation agreement complies with the legal requirements detailed in thesuperannuation splitting laws, the agreement is binding. If a superannuation agreement is binding, then:
• the trustee of a superannuation fund is required by law to implement it; and • the Court is not able to make an order about the superannuation interest that is dealt with in the superannuation agreement.If people are unable to agree, then: • the Court is able to make an order, as part of a property settlement order, about how any superannuation interests are to be split; and • the Court order is binding on the trustee of a superannuation fund, who has to comply with it, provided that the legal requirements have been complied with.Do the superannuation splitting laws apply to me?The superannuation splitting laws apply to people who were married and who have divorced. They alsoapply to people who are still married but who have separated and want to finalise arrangements about theirproperty. They apply regardless of whether people have divorced or separated before the superannuationsplitting laws commenced on 28 December 2002 - provided that final arrangements have not been made fortheir property settlement.The superannuation splitting laws also allow people to enter agreements, either before or during marriageor after separation, about how, in the event of marriage breakdown, superannuation interests are to be split.People are able to enter into a superannuation agreement before they marry, but the agreement does nothave any effect if the parties dont, in fact, get married. In these circumstances State law would apply.If you have legally finalised your property arrangements before the superannuation splitting lawscommenced on 28 December 2002 then, generally, the superannuation splitting laws wont apply to you.However, if there has been no formal legal arrangement about your property - perhaps because you havemade an informal arrangement with your former partner, then the superannuation splitting laws do apply toyou.Also, if your property arrangements have been legally finalised but those legal arrangements weresubsequently overturned after the superannuation splitting laws commenced, then the superannuationsplitting laws apply to you.Do I need to obtain legal advice?Yes. If you dont get legal advice the payment splitting agreement wont be binding on the trustee of thesuperannuation fund.The basis of the Court’s decision regarding division of propertySection 79(4) and of the Family Law Act sets out the matters which the Court must take into account indeciding whether to make any orders altering property interests which can be summarized as follows: 1. The financial contribution made by each party to the marriage or a child of the marriage, to the acquisition, conservation or improvement of any of the property of the parties to the marriage or to property that used to be owned by both/either party of the marriage;
2. The contribution (other than a financial contribution) made by a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or to property that used to be owned by both/either party of the marriage; 3. The contribution made by a party to the marriage to the welfare of the family constituted by the parties to the marriage and any children of the marriage, including any contribution made in the capacity of homemaker or patient; 4. The effect of any proposed order upon the earning capacity of either party to the marriage; 5. The matters referred to in subsection 75(2) so far as they are relevant (see below); and 6. Any child support under the Child Support (Assessment) Act 1989 that a party to the marriage has provide, is to provide or might be liable to provide in the future, for a child of the marriage.The factors listed in section 75(2) relate both to property settlement (where relevant) and to the issue ofspousal maintenance (discussed in the next chapter). These factors can be summarized as follows: • The age and health of the parties; • The income, property and financial resources of each party; • Whether either party has the care of any children under 18; • The commitments necessary to support each party and any children or other people; • Any responsibilities to support children or other people; • Eligibility of either party for a pension, allowance or benefit; • Reasonable standard of living where parties have separated or marriage dissolved; • Duration of marriage and extent to which it has affected the earning capacity of a party seeking maintenance; • The need to protect the party who wishes to continue as a parent; • If either party is co-habiting, the financial circumstances of that; • Any child support assessment.The aims of the Court in reaching a decisionThe Court will reach a decision based on what is just and equitable on the unique facts of your case. TheCourt will aim as far as possible to make orders which will finally determine the financial relationshipbetween parties.Steps taken by the CourtThe Court must firstly identify what the assets of the parties are, what the liabilities of the parties are, andwhat their financial resources are. Financial resources, means people’s superannuation entitlements but canalso mean other things.Whether you are negotiating with the other party to try and reach an agreement as to how to divide yourproperty between you, or if it has become necessary for you to commence proceedings in theFamily Court, you also need to go through the process of identifying both your and the other party’s assets,liabilities and financial resources.It is sometimes necessary to take steps quite early in the property proceedings to ensure assets are notwasted, or the other party provides you with more information about their financial position. There areapplications that can be made to the Court in relation to these matters.After the financial position of the parties is clear, then essentially the Court engages in a two step process:
1. Identifying the respective contributions (both financial and non-financial) of the parties and allocating an appropriate percentage division of the total property.2. Considering the matters under Section 75(2) and the other matters referred to in Section 79(4) of the Family Law Act and identifying what, if any, adjustments should be made to the percentage division after taking those factors into consideration.General PrinciplesThe following principles can be gleaned from an analysis of the statistics relating to the division of propertyfollowing the breakdown of marriage. It should be stressed that the Courts have a considerable amount ofdiscretion in this area and every case is different. The following general principles are provided as a guideto how the Courts seem to apply the law in this area, but it is important that you seek legal advice regardingyour specific situation.In practice, Courts draw a distinction between basic assets and non-basic assets.Basic assets (meaning those that the majority of people have) include bank accounts, the marital home,furniture and other property. Non-basic assets include superannuation, life insurance policy, investments,business rights and inheritances.An analysis of recent case history has revealed the following general observations: • On average women who have custody of the child or children of the marriage receive two thirds of the basic assets and one fifth of the non-basic assets. • Women from marriages with lower asset wealth tend to get a higher percentage of the marital assets on settlement. • Women from marriages with higher value assets generally receive a lower percentage, but there is a much wider range of results. • In terms of contribution, where parties have the majority of their assets as basic assets and the marriage has lasted for some time, the Court will usually regard the respective contributions to be equal. • Courts do not usually assess contributions to be equal when considering non-basic assets such as private companies, major assets acquired prior to the marriage and inheritances.Difficulties associated with asset divisionFamilies with relatively low net assets are very limited in the extent to which they can address therespective needs of the parties because their primary asset is commonly the family home usually with amortgage. Families in this position will typically have limited wealth in non-basic assets such asinvestments which are more easily disposable. In these circumstances, it is difficult to divide assets in away that would assist parties with access to immediate financial resources whilst still securing the familyhome for the resident parent and children.Difficulties associated with single-parent mothers
Traditionally women have played a greater role in home-making and providing the primary care forchildren. This role may often mean that they have made certain sacrifices in terms of their careerdevelopment during the course of the marriage. This may lead to some disadvantage in the labour marketparticularly since their skills may be out of date. Traditionally women have been in a weaker position inthe labour market and their earnings lower than men. Marital breakdown can lead to a drastic fall in livingstandards particularly for single parent mothers and older women.The Court is obliged to take these factors into account. In terms of assessing contributions made during themarriage, non-financial contributions such as home-making and childcare are given equal consideration.The Court will then go on to make an adjustment to take into account the future financial needs of womenand children taking into account career prospects and childcare responsibilities.Factors to considerSome of the matters to be considered when negotiating or making an application for property settlement areas follows: • Superannuation - considerable changes have been introduced by the Federal Government as to how superannuation will be dealt with (see the sub-sections on Superannuation, above); • Capital gains tax and stamp duty; • Whether it is appropriate in your circumstances for the property proceedings to be adjourned; • Cases which involve farms; • If there have been inheritances; • Unusual contributions; • Contributions after separation; • Where there are family trusts; • Where parties have been involved in companies.Information to obtainMake a list of what assets, liabilities and financial resources you and your spouse have in your name orwhich are held on your behalf. Try and obtain documents to prove the existence of those assets, liabilitiesand financial resources and what their values are now. This proof can be by way of a written, datedappraisal for real estate or other items such as motor vehicle insurance papers, bank statements, credit cardstatements and superannuation statements etc.Ideally, you will want documents to show the value of those items: • at the date that you started living with the other party; • at the date that you separated; and • at the time you negotiate the property settlement.It may be difficult to obtain these documents. It may well be through the Court process that you can obtainthis information and those documents from your partner as they are required to disclose all relevantmaterial.
Property settlement calculatorSection 4: detailed case studiesDETAILED CASE STUDY 1• Jack and Jill were married for 10 years and have recently had their marriage dissolved.• They have 2 children aged 7 and 3.• Jack works as a business development manager.• Jill worked part-time as a legal secretary but gave up work when their second child was born.• They own a home worth $500,000 with a home loan of $200,000 outstanding.• The home was purchased with a deposit of $50,000 which Jack had saved prior to meeting Jill.• Jack has a superannuation fund worth $120,000. Jill has a superannuation fund worth $40,000.• During the marriage Jill inherited $50,000 from a relative.• Jack has a bank account with $5,000.• He has credit card debts of $6,000.• Jill is a keen decorator and has made considerable improvements to their home which has added to its value.To assist Jack in estimating what the Court might consider a fair division of property given their historyand circumstances, Jack creates a list of the most important information and figures that the Court will takeinto consideration:General InformationDate married 1/6/1994Date separated 1/10/2004 10.3 yearsAge of child 1 if under 18 years 3Age of child 2 if under 18 years 7Age of child 3 if under 18 yearsAge of child 4 if under 18 yearsPersonal details Jack JillWho was the primary carer during the marriage? YesWho worked full time during the marriage? YesWho decided to separate? Yes YesWho is currently living in the family home? YesWho will be the PRIMARY carer after separation? YesBasic Assets &Liabilities at the time of marriage Jack JillBank & credit union accounts 50,000Money owing on credit cardsReal estate (primary residence)Outstanding mortgageTotal market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesBasic Assets & Liabilities now JointBank & credit union accounts 5,000Money owing on credit cards 6,000
Real Estate (Matrimonial Home) 500,000Outstanding mortgage 200,000Total market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesSuperannuation Jack JillSuperannuation at the time of marriage 60,000 20,000Superannuation now 120,000 40,000Non-basic Assets & Liabilities at the time of marriage Jack JillInvestment property (excluding primary residence)Outstanding mortgageShare & cash investmentsOutstanding investment loansBusinessesOutstanding business loansFarmsOutstanding MortgageInheritancesNon-basic Assets & Liabilities now Jack JillReal estateOutstanding mortgageShare & cash investmentsOutstanding investment loansBusinesses where the person is the sole proprietorOutstanding business loansFarmsOutstanding MortgageInheritances 50,000ResultsSummary of Asset Division Jack JillBasic net assets at the time of marriage 50,000 0Basic net assets now 149,500 149,500Non-basic net assets at the time of marriage 0 0Non-basic net assets now 0 50,000Superannuation at the time of marriage 60,000 20,000Superannuation now 120,000 40,000Estimated division of net assets 45% 55%$ value of assets 231,205 277,795 509,000In this case study, the likely division of assets, taking all factors into consideration, is a 55% / 45% split infavour of Jill.
Note: Given the size of Jack’s super fund, if he wishes to maintain the fund as is, it is likely that Jill will getthe majority of the equity in their home.Once the Percentage share has been agreed, the Court will make orders concerning the division of theassets on the basis of the final percentage share. If Jack decides that he does not want to preserve his superfund, the Court may order that trustee of the fund split the fund according to the agreed division of assets.DiscussionJack and Jill have 12 months from the date the decree was made absolute and the marriage dissolved to filean application for property settlement or apply for a consent order on the basis of an agreement. A Courtwould start by assessing their net assets. This figure is reached by adding up their assets and subtractingtheir liabilities.Basic AssetsThe Court must then consider each parties’ respective contributions to the marriage - both financial andnon-financial. Jack was the main breadwinner and provided the initial deposit towards the purchase of theirhome. Jill was the primary carer for their children, has contributed her inheritance, added to the value of thehome with DIY projects. Given the length of the marriage, the initial asset contributions by Jack and Jill’srole as home maker, the Court is fairly likely to consider the financial and non-financial contributions ofeach equal.Non-Basic AssetsWith respect to the non-basic assets such as Jill’s inheritance, the Court will usually allow the party whohas control of this group of assets to retain ownership. However, the other party will have the right to ashare in the growth in these assets during the period of the marriage. They will also be entitled to a furthershare if they made any material, direct contribution to the development of maintenance of that asset. InJill’s case, her inheritance was placed in a deposit account and thus Jack’s claim will be limited to a smallshare.SuperannuationJack’s superannuation is now a reasonably significant asset. Jill we be entitled to a an equal share of thecontributions that Jack has made to his fund since they were married. In the same way, Jack will be entitledto a share of Jill’s super contributions. As Jack’s super is considerably more than Jill’s, these financialresources have a significant impact (around 5%) on the final share of property.Children & Other FactorsThe Court must then consider the factors contained in section 75(2) where relevant. In this case therelevant factors will include the length of the marriage and the fact that Jill has made a career sacrifice tolook after her children. This will affect her future earning potential. There is also the significantresponsibility of Jill being the primary carer of the 2 young children. Both these factors mean that the
percentage division of the assets will be adjusted in Jill’s favour. The Court will make a decision based onwhat is just and equitable.DETAILED CASE STUDY 2• Tom and Nicole have been married for 5 years.• They have no children.• Both owned separate properties when they met.• Both properties were sold and the profits applied to the purchase of a joint property.• Tom contributed $100,000 and Nicole contributed $50,000.• The property is now worth $950,000.• They have a home loan with $300,000.• They both work full time and earn similar salaries.• They both have substantial Superannuation funds and are well provided for in retirement.• They have made a similar contribution during the course of the marriage.To assist Tom in estimating what the Court might consider a fair division of property given their historyand circumstances, he creates a list of the most important information and figures that the Court will takeinto consideration:General InformationDate married 1/3/2000Date separated 1/5/2005 5.2 yearsAge of child 1 if under 18 yearsAge of child 2 if under 18 yearsAge of child 3 if under 18 yearsAge of child 4 if under 18 yearsPersonal details Tom NicoleWho was the primary carer during the marriage?Who worked full time during the marriage? Yes YesWho decided to separate? Yes YesWho is currently living in the family home?Who will be the PRIMARY carer after separation?Basic Assets & Liabilities at the time of marriage Tom NicoleBank & credit union accountsMoney owing on credit cardsReal estate (primary residence) 100,000 50,000Outstanding mortgageTotal market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesBasic Assets & Liabilities now JointBank & credit union accountsMoney owing on credit cards
Real Estate (Matrimonial Home) 950,000Outstanding mortgage 300,000Total market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesSuperannuation Tom NicoleSuperannuation at the time of marriage 50,000 40,000Superannuation now 100,000 90,000Non-basic Assets & Liabilities at the time of marriage Tom NicoleInvestment property (excluding primary residence)Outstanding mortgageShare & cash investmentsOutstanding investment loansBusinessesOutstanding business loansFarmsOutstanding MortgageInheritancesNon-basic Assets & Liabilities now Tom NicoleReal estateOutstanding mortgageShare & cash investmentsOutstanding investment loansBusinesses where the person is the sole proprietorOutstanding business loansFarmsOutstanding MortgageInheritancesResultsSummary Tom NicoleBasic net assets at the time of marriage 100,000 50,000Basic net assets now 325,000 325,000Non-basic net assets at the time of marriage 0 0Non-basic net assets now 0 0Superannuation at the time of marriage 100,000 90,000Superannuation now 200,000 170,000Estimated division of net assets 54% 46%$ value of assets 550,000 470,000 1,020,000Discussion
Given that this is a relatively short marriage, the Court will attach more weight to their initial contributions.Their main asset is the matrimonial home. The Court is likely to order that they should each receive backtheir initial contribution and the increase in the value of the property during the course of their marriageshould be split evenly to reflect their equal contributions to the marriage. There are no factors in section74(2) which should alter the percentage split as they have the same earning potential and both have securefinancial futures.DETAILED CASE STUDY 3• Sara and Ranjif have been married for 15 years.• Ranjif’s family owned a shoe shop and Sara worked for him there.• Ranjif had shares in some of his family’s businesses.• He sold these shares and was able to contribute $700,000 to the value of their first home.• During the course of their marriage, Sara looked after their 2 children and worked part-time as a bookkeeper for the family business.• Their home is now worth $1.5 million and is their primary asset.To assist this couple in estimating what the Court might consider a fair division of property given theirhistory and circumstances, they create a list of the most important information and figures that the Courtwill take into consideration:General InformationDate married 1/6/1990Date separated 1/10/2005 15.3 yearsAge of child 1 if under 18 years 10Age of child 2 if under 18 years 13Age of child 3 if under 18 yearsAge of child 4 if under 18 yearsPersonal details anjif SaraWho was the primary carer during the marriage?Who worked full time during the marriage? YesWho decided to separate? Yes YesWho is currently living in the family home?Who will be the PRIMARY carer after separation?Basic Assets & Liabilities at the time of marriage Ranjif SaraBank & credit union accounts 700,000Money owing on credit cardsReal estate (primary residence)Outstanding mortgageTotal market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesBasic Assets & Liabilities now JointBank & credit union accountsMoney owing on credit cardsReal Estate (Matrimonial Home) 1,500,000
Outstanding mortgageTotal market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesSuperannuation Ranjif SaraSuperannuation at the time of marriage 25,000 5,000Superannuation now 70,000 20,000Non-basic Assets & Liabilities at the time of marriage Ranjif SaraInvestment property (excluding primary residence)Outstanding mortgageShare & cash investmentsOutstanding investment loansBusinessesOutstanding business loansFarmsOutstanding MortgageInheritancesNon-basic Assets & Liabilities now Ranjif SaraReal estateOutstanding mortgageShare & cash investmentsOutstanding investment loansBusinesses where the person is the sole proprietorOutstanding business loansFarmsOutstanding MortgageInheritancesResultsSummary Ranjif SaraBasic net assets at the time of marriage 700,000 0Basic net assets now 750,000 750,000Non-basic net assets at the time of marriage 0 0Non-basic net assets now 0 0Superannuation at the time of marriage 25,000 5,000Superannuation now 70,000 20,000Estimated division of net assets 58% 42%$ value of assets 928,500 661,500 1,590,000Discussion
Sara’s non-financial contribution during the course of the marriage is recognised under the Family LawAct. The Court should also recognise that Ranjif has made a large contribution to the purchase of theirhouse and given them a certain standard of living. The balance of these contributions is likely to result inan initial split in favour of Ranjif in the region of 70:30. However the Court will then consider thesection 75(2) factors. The children will live with Sara and she will be able to earn a limited income doing apart-time job. She does not have the earning potential of her husband and is the primary carer for thechildren. She made certain career sacrifices to look after the children and her skills are out of date. Aconsideration of these factors is likely to cause a percentage shift in her favour of some 10-15%.
DETAILED CASE STUDY 4• John and Deborah have been married for 10 years.• They have a son aged 6.• At the start of the marriage John worked as an IT Consultant and Deborah worked as a nurse.• They purchased a home with a deposit provided by John and he paid for the home loan whilst Deborah paid for the household bills.• Deborah gave up work when their son was born.• She met a contact at a mother and baby group which led to her setting up a business exporting Australian-made health and beauty products. The business really took off and she began to devote more and more time to the business. John started to work part time from home to help look after their son.• They have now filed a joint application for divorce.• Their main basic asset is the family home now valued at $750,000 with a home loan of $350,000.• Deborah’s business is valued at $1,000,000.To assist Tom in estimating what the Court might consider a fair division of property given their historyand circumstances, he creates a list of the most important information and figures that the Court will takeinto consideration:General InformationDate married 1/6/1994Date separated 1/10/2004 10.3 yearsAge of child 1 if under 18 years 6Age of child 2 if under 18 yearsAge of child 3 if under 18 yearsAge of child 4 if under 18 yearsPersonal details John DeborahWho was the primary carer during the marriage? Yes YesWho worked full time during the marriage? Yes YesWho decided to separate? Yes YesWho is currently living in the family home? YesWho will be the PRIMARY carer after separation? YesBasic Assets & Liabilities at the time of marriage John DeborahBank & credit union accounts 50,000Money owing on credit cardsReal estate (primary residence)Outstanding mortgageTotal market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilities
Basic Assets & Liabilities now JointBank & credit union accountsMoney owing on credit cardsReal Estate (Matrimonial Home) 750,000Outstanding mortgage 350,000Total market value of carsOutstanding car loans / leasesFurniture & other assetsOther liabilitiesSuperannuation John DeborahSuperannuation at the time of marriage 10,000 5,000Superannuation now 25,000 30,000Non-basic Assets & Liabilities at the time of marriage John DeborahInvestment property (excluding primary residence)Outstanding mortgageShare & cash investmentsOutstanding investment loansBusinessesOutstanding business loansFarmsOutstanding MortgageInheritancesNon-basic Assets & Liabilities now John DeborahReal estateOutstanding mortgageShare & cash investmentsOutstanding investment loansBusinesses where the person is the sole proprietor 1,000,000Outstanding business loansFarmsOutstanding MortgageInheritancesResultsSummary John DeborahBasic net assets at the time of marriage 50,000 0Basic net assets now 200,000 200,000Non-basic net assets at the time of marriage 0 0Non-basic net assets now 0 1,000,000Superannuation at the time of marriage 10,000 5,000Superannuation now 25,000 30,000Estimated division of net assets 35% 65%$ value of assets 507,000 948,000 1,455,000
DiscussionBasic AssetsThis is an example of the more traditional roles in a marriage being reversed. The same basic principleswill however apply. The starting point will be the parties’ respective contributions to the asset pool of themarriage. The main basic asset is the family home with an equity of $400,000. The main non-basic asset isDeborah’s business valued at $1,000,000. In terms of their respective contributions to the basic assets,John provided the deposit and made the home loan payments at the start of the marriage. Initially Deborahgave up her career to look after their child and run the home. However their roles reversed and John beganto sacrifice his career as Deborah’s business took off. John has made a larger contribution to theaccumulation of their basic assets. His percentage share will be further increased because his futureearnings are reduced as a result of his career sacrifice and he continues to be the primary care for theirchild. As a result of these factors, he is likely to be entitled to at least a two thirds share of the basic assets.Non-Basic AssetsIn practice, the division of the non-basic assets is treated differently. Deborah has used her unique skillsand ideas to develop the business and make it a success but arguably she has been able to devote time tothis because of the fact that John was prepared to provide the support at home and play a bigger role inchild care. Statistics would suggest that a Court would award John with a fifth share of these assets as hewould be assessed as having made a lesser contribution.