Last updated 21 November 2016
The family law courts have a wide discretion to make such orders about property it considers just and equitable in the circumstances. The court undertakes a five-step process:
- The court will consider whether it is just and equitable to make any order for property settlement, or whether the court should not adjust the existing legal ownership structure (see Stanford and Stanford (2012) FLC 93-518 (applied for example in Watson & Ling  FamCA 57).
- The court will identify and value the property pool.
- The court will assess the contributions of the parties (ss 79(4)(a)–(c) Family Law Act 1975 (Cth) (Family Law Act)).
- The court will evaluate the future needs of the parties involving matters referred to in ss 79(4)(d) to (g) and 75(2) of the Family Law Act.
- The court will consider the distribution of property between the parties in light of the above and the further consideration whether the order proposed is just and equitable (s 79(2) Family Law Act).
Determining the property pool
After determining on the given facts that it is just and equitable to make an order for property settlement, the court will then determine the extent of the property (assets and liabilities) of the parties. In most cases, this will be calculated as at the date of the hearing. Therefore, the court may take property acquired after separation into account (Farmer v Bramley (2000) FLC 93–060).
The court will require information about the assets, liabilities, resources, income and expenses of the parties.
Each party has an obligation to provide complete details of their financial circumstances and any property in which they have an interest (Black & Kellner (1992) FLC 92–287). The court has the power to make an order going beyond the identified property if there is sufficient evidence to support a finding that a party has not made full disclosure of their assets (Chang v Su (2002) FLC 93–117). Also, if full and frank disclosure (complete information) is not made by a party, then the court may order that party to pay the legal costs associated with that non-disclosure.
When a party disposes of an asset after separation but prior to trial, the court may bring the proceeds of the disposal into the pool of assets on a notional basis and make a distribution taking the asset disposed of into account. The extent to which the court will add back property will depend upon how the party used the funds. For example:
- where the proceeds of sale have been applied to the acquisition of new property, the court will ordinarily not add back the proceeds but will take the value of the new property acquired into account
- if a party has used the funds for reasonable living expenses, the court may find that it is not appropriate to add back the funds (Omacini v Omacini (2005) FLC 93–218)
- where funds have been expended on legal fees, they will most commonly be added back to the property pool (Milankov & Milankov (2002) FLC 93–095; see also for contrast Chorn v Hopkins (2004) FLC 93–024).
The legal fees are more likely to be added back if they have been spent from joint funds or a capital asset that existed at separation. They may not, however, be added back if derived from post-separation income.
While usually the court will take the assets and liabilities as it finds them at the date of hearing, add backs are now a very common argument in proceedings before the court. However, while add backs in relation to expenditure after separation are a matter for the court’s discretion, that discretion is very unlikely to be exercised to add notional assets into the pool except in the instances of:
- legal fees paid (usually out of capital)
- assets or money given to third parties
- where one party has acted recklessly, negligently or wantonly (e.g. by expenditure on gambling, prostitutes or improbable scams)
- where the court is not satisfied that the asset has been expended or disposed of.
Both married and de facto couples (who separated on or after 1 March 2009 or prior but elect to have their property settlement determined under the Family Law Act) may now seek the following orders pursuant to pt VIIIB of the Family Law Act in relation to eligible superannuation entitlements:
- a splitting order—the court can make a property settlement order, which may include the allocation of superannuation between the parties, called superannuation splitting
- a flagging order—similar to an injunction, the court may prevent dealings with a superannuation interest pending determination of the property proceedings or pending a party becoming entitled to receive their superannuation.
The following principles are fundamental to the scheme in pt VIIIB of the Family Law Act:
- It applies to eligible superannuation plans (as defined in the Family Law Act, which would typically include interests in commonly used public superannuation funds as well as self-managed superannuation funds).
- Superannuation may be treated as if it is property.
- Separating couples may split superannuation by agreement, whether included in a financial agreement or dealt with alone or by order.
- Trustees of superannuation schemes will be bound by that agreement or order where basic conditions are met.
- When a court is splitting superannuation, it should be properly valued.
The parties should obtain up-to-date superannuation information forms in respect of each superannuation interest as well as obtain a valuation of the interest if a valuation is not provided by the trustee of the fund. Prior to obtaining any splitting order, the parties need to submit the draft order to the superannuation fund to ensure that they have afforded procedural fairness to the trustee of the fund. Otherwise, the court will not make the order until it is satisfied that the trustee of the fund has been given procedural fairness.
When confronted with a property settlement involving a superannuation interest, expert assistance should be obtained from a family lawyer and superannuation specialist.