The Four Step Process

When a relationship comes to an end and a decision needs to be made in relation to the financial property settlement, the Family Law Court must determine a proper division of the asset pool by applying common legal principles.

Broadly, when the Court embarks upon the task of dividing property between the parties the Court will apply what is commonly known as the “Four Step Process”.

Step 1: Ascertaining the Net Property Pool

Generally, all property must be taken into account, whether acquired before or during the relationship or after separation.

Property includes assets of either or both the parties. This can include real estate, shares, cars, jewellery, savings, furniture and effects.

The Court must also determine the net value of the property pool.

The net value of the property pool is generally ascertained by subtracting the parties’ liabilities from the gross value of the parties’ assets.

Superannuation is treated differently. Depending on the type and value of fund, it may be divided between the parties at the time that a Property Order is made or an Order made for it to be split at a later date.

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.

When determining the parties’ property pool, consideration must also be given to taxation liabilities including capital gains tax, stamp duties and other financial issues.

Step 2: Contributions both Financial and Non-Financial

The next step is to assess each party’s contribution during the Relationship, both financial and non-financial. Non-financial contributions include contributions made as homemaker or parent.

Initial financial contributions brought into the relationship can be relevant, as are gifts and inheritances and other “out of the ordinary” moneys received.

Step 3: Future Needs

The next step is to assess the future needs of both parties, taking into account a range of factors including the parties’:

– Age

– Health

– Income earning capacity

– The property of each party

– Whether the party has the care of or support for children

– The financial circumstances of any new relationship

The Court can make an appropriate adjustment depending on any of or all of the above factors.

Step 4: Practical Effect – Just and Equitable

The final step is to consider the practical effect of any proposed settlement, to achieve a result which is just and equitable in all the circumstances.

This step of the process will sometimes include a consideration of the appropriate blend of any settlement between immediately available assets, and deferred but important benefits such as superannuation. (Read more on the concept of “Just and Equitable“).

Financial Disclosure

Before parties can enter into a final property settlement, both parties have a clear obligation to make full and frank financial disclosure about their respective financial circumstances.

Each party has to provide to the other party all of their supporting financial documents.

Depending on the parties respective financial positions these documents can include but are not limited to proof of earning documents including Group Certificates, Taxation Returns, Business and Company records, Personal and Credit Card Bank Statements, Share Portfolio Valuations and Superannuation Statements.

A failure to make proper disclosure of a relevant matter can have very serious consequences. (Read more on Full and Frank Disclosure)

Time limits

It the Parties are married then they have 12 months from the date of Divorce in which to apply to the Court for Property Orders or a Spousal Maintenance Order.

When a De-facto Relationship comes to an end an application for property adjustment or maintenance must be made within two years of separation.

A party must seek leave of the Court to make an application after this time.

In exceptional circumstances the Court may grant leave for an application to be made outside of this time.

The above is only a cursory examination of what needs to be considered by the Court in determining the division of property. Our family lawyers can assist you with a more detailed analysis of the legal principles involved and of course, provide you with advise that is specific to your circumstances.

If you require assistance in obtaining Family Court Property Orders for the finalisation of your financial property settlement, our experts at Prime Lawyers – Family Law Division can help. Contact us to make an appointment with a family lawyer at your nearest Prime Lawyers office.

We have offices in Sydney, Parramatta, Chatswood, Sutherland and Wollongong.