There are many misconceptions about how divorce property settlements are determined. Is it 50% / 50%? Are pre-existing assets included? What if one spouse has a significantly higher income? What about the inclusion of a family trust? In this 'Back to Basics' presentation all these questions and more will be answered in easy to understand and practical terms. This overview will help you, better help your client.

1. ‘HOW TO’ OF PROPERTY SETTLEMENT
Amy Ryan - Presenter

2. PRESENTER
AMY RYAN
• Practicing in the area of Family Law since 2005
• Senior Associate at Michael Lynch Family Lawyers
• Accredited Specialist in Family Law
• Separation and divorce
• Property and financial settlement for both married and de facto couples
• Parenting arrangements including with whom a child may live or spend time
with
• Child support issues
• Spouse and adult maintenance applications
• Personal protection issues including Domestic Violence.

3. MICHAEL LYNCH
FAMILY LAWYERS.
WHO
ARE
WE?
Advice, negotiation, mediation, court
representation.
Specialist Family Lawyers
Established for over 20 years
11 Lawyers - 5 Accredited Specialists
- over 100 years combined
professional experience

4. Regular articles and publications
MICHAELLYNCHFAMILY
LAWYERS.
WHAT
WE
DO.
Fixed cost initial interview
($385 for Solicitor or $440 for Accredited Specialist)
Upfront cost advice
FREE book (over 120,000 copies)
FREE monthly e-newsletter ‘Family Flyer’
(over 5,000 readers)
Presenting over 50 seminars a year

5. THE SCOPE OF FAMILY LAW
• Separation
• Divorce
• Property Settlements
• Parenting arrangements (who children live/spend time)
• Child Support
• Spouse Maintenance
• Domestic Violence
• Relocation
• Paternity
• Change of name
• International Child Abduction.

6. OVERVIEW
• What is property settlement?
• How do we assess entitlements?
• How to we reach an agreement?
• How do we finalise an agreement?
• Some practical considerations.

7. AIM OF THIS PRESENTATION
• To upskill you in Family Law so that you are
attune to possible issues your client may face.
• Enabling you to provide some guidance and
insight to your client as their trusted advisor.
• Not training you to give Family Law advice.

8. WHAT IS
A DIVORCE?
• A legal severance of the marriage.
• No Fault. Only ground for divorce is that marriage has
broken down irretrievably.
• Separate Application, can be made jointly or solely.
• Requires 12 months separation at the time application is
filed. Children and property issues do not need to be
finalised at time the application is made.

9. WHAT IS
PROPERTY
SETTLEMENT?
• A complex and multi-faceted area.
• Alteration of existing legal entitlements to
property.
• Available to married couples and de facto couples
who meet criteria.
• Section 81 FLA – the ‘clean break’ principle.
Extinguish economic relationship between
separated couples as far as practical.
• Duty of full and frank disclosure including
exchange of documents.
• Subpoenas.

10. MEANING OF DE
FACTO
RELATIONSHIP?
A person is in a de facto relationship with another
person if:
• the persons are not legally married to each other;
and
• the persons are not related by family; and
• having regard to all the circumstances of their
relationship, they have a relationship as a couple
living together on a genuine domestic basis.
A de facto relationship can exist even if one of the
parties is legally married to someone else or is in
another de facto relationship.

11. DE FACTO GATEWAY
REQUIRMENTS
To apply for property settlement as a de facto you must also meet one
of the ‘gateway’ requirements:
• 2 year relationship;
• Child of the relationship;
• Substantial contributions; or
• Registered relationship.

12. DISPELLING
SOME
MYTHS
Property division does
not require a fire sale.
There is NO
50% / 50% rule of
division.
Entitlement is NOT
based on ‘dollar in,
dollar out’.

13. PROPERTY
SETTLEMENT
Time limits for court application
• Marriages - 1 year after Divorce
Order
• De facto Relationships – 2 years from
date of separation.

14. PROPERTY SETTLEMENT: THE STEPS
Not a mathematical exercise – court has wide discretion.
Stanford [2012] HCA 52 Is it just and equitable to proceed with property alteration? In most
cases – yes. In rare cases it may not be appropriate.
Step 1: Identify and value the net property
Step 2: Consider the contributions of the parties (percentages)
Step 3: Future needs
Step 4: Is the division ‘just and equitable’?

15. STEP 1: WHAT IS THE ASSET POOL?
• In either parties' name, joint
names or relevant trusts and
companies.
• Identify and value all assets,
liabilities and superannuation.

16. VALUATIONS
• Value is at time of trial (or settlement) – not at separation or
acquisition.
• Starting point for most valuations is “fair market value” – i.e.
the price a willing but not anxious purchaser at arm’s length
with adequate information is prepared to pay to a willing
but not anxious seller.
• If values can’t be agreed then can be determined by
independent valuation:
• Real estate – property valuer
• Furniture, chattles, vehicles – generalist valuer
• Business, company or trust – forensic accountant
• May be appropriate to order sale if Court is unable to
determine the value of the asset.

17. WHAT IS
PROPERTY?
• FLA – has very broad powers (unique jurisdiction).
• ‘Property’ broad definition (Sect. 4 FLA).
Includes every possible interest a person can have.
For Family Law it is irrelevant in whose name
property is held i.e: jointly or individually. It is
irrelevant when and how the property was
acquired.

18. COMPANIES AND TRUSTS
• Family Court has power to look through corporate veil.
• Usually trusts and companies do come within the definition
of property and form part of the asset pool.
• Even if a party is not a trustee of a trust or director of a
company, but they have control over the trust or company,
it is still an asset and the Court has power to deal with it.
• The important word is ‘control’.

19. COMPANIES AND TRUSTS
A parties’ power of appointment under the trust deed and all the attributes
it carries with it amounts to de facto ownership of the property of the
trust. In a family situation the Family Court is not bound by formalities
designed to obtain advantages and protection for a party who stands in
reality in the position of the owner.
• Ashton v. Ashton FamCA [1986]
• Harris and Harris FLC (1991) 92-254
• Kennon v. Spry (2008) 238 CLR 366

20. OVERSEAS PROPERTY
• Section 79 orders are made in personam not in
rem (i.e. against the party personally not against
the property) so there is no impediment to taking
foreign property into account or making orders
which deal with it.
• The difficulty is usually with enforcement of the
order in the overseas country.

21. INHERITANCES
• A bequest that has been received is property.
• The interest of a beneficiary under a Will, before the estate is administered, is
property.
• Where a potential beneficiary has no enforceable right to stop the testator changing
their Will that is not property, although it may be a “future needs” factor but not a
financial resource.
• An entitlement under a Will of a living testator who has ceased to have testamentary
capacity may be a financial resource.
• Generally a Court will not consider a potential inheritance to be a financial resource
unless there is some degree of entitlement to, control over, or relative certainty of
receipt of property. In the context of an inheritance that usually requires a Will to have
been made and the testator to have lost testamentary capacity to revoke or alter their
Will.

22. PETS
Considered property, not children

23. SUPERANNUATION
How is Superannuation Considered in a Property Settlement?
Pre 2002- Superannuation not defined in the Family Law Act. The options
available to the Court at the time:-
• Deferring Application until member’s superannuation became payable;
or
• Calculating the present value of a superannuation interest as a
financial resource and split non-superannuation assets.
Post 2002- Family Law Act amended to define Superannuation as “Property”:
• Superannuation can now be split by way of a Supersplitting Order.
Either Cash Amount or Percentage of the account.
• Flag Superannuation.

24. OVERSEAS SUPERANNUATION
FUNDS/PENSIONS
• The amendment to Family Law Act does not
provide the courts jurisdiction to deal with
overseas superannuation policies or overseas
pension funds.
• The jurisdiction only extends to
superannuation funds and pensions in
Australia.
• Overseas funds and pensions continue to
treated as a Financial Resource.

25. VALUING SUPERANNUATION
4. Required to obtain a SIF from
the fund if there is to be a
superannuation split from that
fund.
3. Defined Benefits- Important to
obtain SIF, do not rely on a current
member statement.
2. The Trustee of the fund is
entitled to charge a “reasonable
fee” for providing the information.
1. Member and Non Member
Spouses can obtain a valuation by
serving a completed
Superannuation Information Form
(SIF) on the fund (can get value for
different and/or multiple dates).

26. CAPITAL GAINS TAX &
REALISATION COSTS
• CGT should not be taken into account as a
liability attached to the property unless the
sale is inevitable, or would probably occur
in the near future. If there is a significant
risk that the asset will have to be sold in
the short to mid-term, then the Court may
take that risk into account as a relevant
“future needs” factor, the weight to be
attributed to that factor varying according
to the degree of the risk and the length of
the period within which the sale may
occur: [Rosati (1998)]
• In some cases it is appropriate to take
contingent CGT liability or realisation
costs into account – e.g. if the asset has
been valued on the basis of its net
realisable value: [Rothwell (1994)]
• Past taxation losses which may be offset
against future incomes may be a financial
resource: [JEL and DDF (2001)]

27. WHAT ABOUT…
• BUSINESS VALUE appropriate methodology (dividend
based, earnings based, asset based, discounted cash
flow or market comparison methodologies).
• PERSONAL TAX LIABILITIES
• COMPANY TAX LIABILITIES
• (LATENT) CAPITAL GAINS TAX
• DIVISION 7A
• TAX ADVICE / PLANNING

28. STEP 2: CONTRIBUTION FACTORS
• Initial contribution (date of cohabitation) – provides springboard for
accumulation of assets.
• During relationship:
• financial (income, inheritance, personal injury, gifts/loans,
redundancy, lottery, etc)
• non-financial (maintenance, renovations to property, managing
investments)
• homemaking and parenting (including care provided by
grandparents, care of children from other relationships).
• Post separation contributions.
• Retrospective analysis – each contribution will be weighed against
the other.
• If one party has made a greater contribution then they will receive a
percentage adjustment in their favour.
• Case by Case Assessment.

29. TREATMENT OF GIFTS & INHERITANCES
• Funds from an inheritance or a gift from a family member or friend are treated as additional
‘contributions’ of the party who received them.
• Any money that was received however does not get ‘refunded’. The party will receive a
percentage division in their favour.
• Court will need to consider:
• The size of the gift or inheritance;
• The timing of the gift or inheritance; and
• How the gift or inheritance was used.

30. BAD BEHAVIOUR
• Infidelity and other moral ‘wrongs’ are
generally not relevant to the assessment of
contributions (but can certainly be relevant
to the dynamics of negotiations!).
• Losses incurred by either or both of the
parties during the marriage (e.g. bad
investment decisions) should generally be
shared (although not necessarily equally)
unless:
• one of the parties embarked upon a
course of conduct designed to reduce
or minimise the pool of assets; or
• one of the parties had acted recklessly,
negligently or wantonly with
matrimonial assets, the overall effect of
which has reduced or minimised their
values.
• Serious domestic violence can be relevant
if it impacts on the victim’s capacity to
contribute.
• “Wasteful” behaviour can be relevant – e.g.
significant funds wasted on gambling,
alcohol, etc. can be considered a ‘negative
contribution’.

31. STEP 3: FUTURE NEEDS
• Look at needs of each party going forward from relationship.
• Most Common Factors:
• Comparative ages and health
• Respective incomes and earnings capacity
• Care of children,
• Duration of marriage and effect on a party's earning capacity
• Retaining asset with contingent CGT liability
• Future prospective inheritance
• If one party has greater future needs they will receive a percentage adjustment in their
favour.

32. EARNING CAPACITY
In property proceedings, it is open to a court to give weight to
the ability of a party to earn income, especially where the
opportunity clearly exists to utilise that ability. Whether it is or
is not appropriate to require a party to work particular hours or
work in a particular occupation is a question peculiarly within
the province of a trial judge and needs to be measured on a
case by case basis.

33. CARE OF CHILDREN
The payment of child support in no way compensates the
custodial parent for the loss of career opportunity, lack of
employment mobility and the restriction on an independent
lifestyle which the obligation to care for children usually entails.

34. Short life expectancy (where relatively certain) can be a factor – i.e. that
party has limited future needs.
LIFE EXPECTANCY

35. STEP 4: RESULT – JUSTICE AND EQUITY
• Percentage division (%) of a property pool
• Look at overall outcome (adding together step 2 and step 3) – is it overall just and
equitable?
• Need to look at the practical effect of the orders in light of the specific asset pool.
NOTE:
• Inexact science
• Each case is different

36. SHOULD THERE BE A SUPERANNUATION SPLIT?
What the court considers
• Whether there are children
• If splitting the superannuating means the primary care can retain the matrimonial home
• The value of all the property and the proportion of the property pool which is
superannuation
• The needs of the parties for cash and saleable assets
• The type of fund
• The age of the parties.

37. RESOLUTION PROCESS
• Direct negotiation between parties.
• Correspondence between lawyers.
• Round table conference.
• Mediation (compulsory for parenting disputes but optional for
property disputes).
• Court
 Interim Hearing
 Disclosure
 Valuations
 Mediation
 Trial (12 – 24 months, only a small percentage of cases)
• Arbitration.

38. PROPERTY
– AGREEMENTS
Beware: an Agreement can be set aside, if
there is not full disclosure.
Must document a Property
Settlement:
• Finality
• No Stamp Duty on
transfers made
pursuant to the
documented Agreement
• CGT Rollover Relief
• Only way to split
superannuation
Two options:
1. Consent Order – Court
approved
2. Binding Financial
Agreement – legal
advice.
Should get tax/accounting
advice and/or financial advice
before finalising.

39. PRODUCTION OF DOCUMENTS BY YOU
• Authority from client
• Subpoena (if in Court)
 For documents / for person / for both
 Documents go to Court
 Entitlement to conduct money
 Can ask for costs of attending Court
 Penalties if you don’t comply
 Can object to subpoena on limited grounds
(e.g irrelevant, too broad)
 Prudent to inform clients and seek legal advice prior
to producing documents.

40. ADVICE FROM YOU
Financial
planning /
insurance
SMSF splitting
provisions
Whether to
retain trust or
company
structure
Whether
proposed
terms achieve
the desired
effect
Tax and
accounting
implications of
proposed
settlement

41. GETTING PRACTICAL –
THINGS TO CONSIDER
Access funds
Limit liability
(mortgage/
credit cards)
Stay in the
house (if
trying to keep
it)
Review your
Estate Plan
• Will
• Power of Attorney
• Superannuation
Nominations
• Sever Joint
Tenancy
Get
preliminary
legal advice
Photograph
valuables
Change
passwords
and PIN
numbers; and
redirect mail
Collate /
protect
important
documents
Contact
Centrelink
Get a plan
If living
under the
same roof –
negotiate
boundaries
Store
sentimental
items off-site

42. THANK YOU.
QUESTIONS?
• Want to know more?
• Do you have more specific topics relating to Family Law that you need some answers
to?
• We can come to your firm and give a more in depth presentation.
• Email: law@mlynch.com.au
• Feedback survey
• Past webinars on WWW.MLFL.COM.AU

43. GET IN TOUCH
Fixed Fee – First Consultation | $385 (incl. GST) for Solicitor or Associate | $440 (incl. GST) for Accredited Specialist
Address: 9 / 193 North Quay, Brisbane
Phone: (07) 3221 4300 | Email: law@mlynch.com.au | Website: www.michaellynchfamilylawyers.com.au
The material contained in this presentation does not constitute specific legal
advice