Property Settlements After Separation

Family Law: 04 February 2025

Author: Julia Popa - Our People

A key issue that a former couple must determine following separation is the division of their assets and liabilities in law. This process is called a ‘property settlement’. If your marriage or de facto relationship has broken down, it is vital that you are aware of your entitlements to achieve a fair property settlement.

1. Time Limits Regarding Property Settlements

The time limit for applying to the Federal Circuit and Family Court of Australia for a property settlement depends on whether you were married or in a de facto relationship:

• Married couples: You have 12 months from the date of your divorce in which to apply to the Court for a property settlement; and

• De Facto Couples: You must apply for a property settlement within 2 years from the date of separation.

If you are past the time during which you can make an application, you can only seek a property settlement if your ex-partner consents, or if special permission to pursue a property settlement is granted by the Court (which is difficult to obtain in any event).

As a general rule however, if you engage a solicitor to assist in your property settlement following a marriage breakdown, family lawyers will commonly recommend against applying for a divorce until after the property settlement is finalised. This way, it is ensured that time constraints will never be a problem.

Otherwise, with respect to de facto couples, a problem usually arises with respect to the official date of separation, as this date may make or break an individual's rights to a property settlement entirely.

2. Tailored Process

When it comes to dividing assets and liabilities between separated partners, the Court takes a bespoke approach. The Family Law Act 1975 (Cth) and relevant case law prescribe this process as follows:

Is it just and equitable to divide property?

Firstly, the Court will determine whether a division of property is “just and equitable”. A property division will be considered appropriate in long-term relationships, where the assets have been jointly accumulated, or when children are involved. Conversely, in very short relationships or if one party has not made any contributions, the Court will determine that a division is not required and any order made will aim to place the parties in the position they were at the commencement of the relationship (that is to say if one partner brought in a property, then that partner will leave with that property).

Identifying the Asset Pool

The second step involves identifying the relevant assets and liabilities. These can include:

• Real estate (such as the family home or investment properties);

• Bank accounts, savings or investments (such as shares);

• Motor vehicles;

• Businesses;

• Entitlements to superannuation (including self-managed superannuation funds); or

• Loans, credit cards or mortgages.

It is important to be aware that the property pool available for distribution is determined as at the date you choose to pursue a property settlement, not at the date of separation.

For example, imagine a married couple who have been separated for some years but are not yet divorced. In the absence of a divorce, the ‘clock’ has, in effect, not yet begun ‘ticking’ when it comes to the time limit to seek a property settlement. After a few years apart, one spouse wins the lottery. At that point, and for whatever reason, the spouses hadn’t reached a formal property settlement. In this case, the non-winning spouse could now decide that they want a property settlement, particularly as the property pool has significantly increased due to the windfall. This leads to a situation in which the party who did not win the lottery is trying to claim their share of the lottery win.

You therefore need to make it a priority to pursue a financial settlement as soon as possible after separation. This ensures that all future assets you acquire after separation are off-limits to your ex-spouse.

Assessing Contributions

One of the key considerations in property settlements are the contributions of each party to the relationship. These can be:

• Direct financial contributions, such as respective incomes or property that either spouse brought into the relationship;

• Indirect financial contributions, such as gifts, inheritances or financial support from family members (such as parents contributing to a wedding or supplying the deposit for a house);

• Non-financial contributions, include actively undertaking renovations to enhance the value of property; or

• Homemaker contributions, including raising the children and running the household.

As is often the case in a traditional relationship, one spouse typically stays at home to raise the children (that is, contributions as a homemaker) and the other spouse is the breadwinner (that is, financial contributions). Both roles are equally important from the Court’s point of view and the stay-at-home spouse will not be disadvantaged in a property settlement.

Consideration of Future Needs

The Court then considers the projected future needs of both parties. This includes weighing things like:

• Age;

• Health (any health diseases/disabilities, etc.);

• Income and assets;

• Financial resources (like being a beneficiary to a trust);

• Capacity to work;

• Standard of living;

• Any effect the relationship has had on earning capacity; and

• The children’s care arrangements.

If one spouse becomes the primary carer of the child/ren after separation, this will affect their capacity to obtain employment. Accordingly, the Court may adjust the property split to be sure the property settlement sufficiently recognises such future needs.

Making it Official with a Property Settlement

If an agreement has been reached in relation to a property settlement, it should be formalised to ensure that the terms are legally binding. There are two primary methods of accomplishing this:

• Consent Orders: Where both parties settle without going to Court, they can seek Consent Orders from the Court. This simply requires that the agreement be sent to the Court accompanied by a document prepared by the respective lawyers summarising why the relevant agreement is ‘just and equitable’. Once sealed, the Consent Orders are binding in law and a breach of the same may entitle the non-breaching party to apply to the Court to have them enforced.

• Binding Financial Agreement: An agreement can also be formalised by way of a Binding Financial Agreement. This pathway is often pursued when the parties do not necessarily have an agreement that is considered ‘just and equitable’. Both you and your ex-partner must obtain independent legal advice before entering into a Binding Financial Agreement, which your respective lawyer(s) must confirm in writing. The catch is that if you and your ex-partner skip this step, then the Binding Financial Agreement will not be binding in the eyes of the law.

Seeking Legal Advice

Negotiating a property settlement can be an emotional and complex process with many variables to weigh. If you would like some advice or assistance in relation to a property settlement following separation, please call our office on 03 8600 6000 and speak with one of our highly qualified and experienced family lawyers.