It is not uncommon for parties in a divorce to have assets that are outside Australia. A common concern in property settlement proceedings is whether overseas assets are included in the property pool.
This article explores the answer to this question and how overseas assets are treated in a property settlement in Australia.
How do Court’s determine how property is divided post separation?
The Court goes through a 5 step process to determine the division of assets owned by each party. Check out our article on the property settlement process for more information on this topic.
The first step in the process, provided the Court says it is just and equitable to make an order, is identifying the property pool.
The property pool consists of the property/assets, liabilities and superannuation owned by both parties.
What is property?
Section 4 of the Family Law Act 1975 defines “property” as follows:
“Property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”
Property under s4 of the Family Law Act is commonly accepted to include:
- real estate (including overseas real estate)
- bank accounts
- shares
- an interest in a business/partnership
- control of trust assets (but more than control is generally required, the trust must be the alter ego of the party, used for their sole benefit);
- vehicles
- superannuation
- jewellery
- Furniture
- personal belongings.
This is a broad definition of property which includes anything which has a value.
For more information on what is not property and what may be considered a financial resource, check out or article on the difference between property and a financial resource.
How are overseas assets treated in a property settlement in Australia?
Foreign assets may include overseas properties, money held in international accounts, international shareholdings and overseas pensions.
Most overseas property falls under the Family Law Act’s broad definition of property, and otherwise it is considered a financial resource. For example, if it is a bank account, a piece of land or a share then it is an asset. If it is a “super fund” like in Australia, then it may be treated as a financial resource.
The Australian Family Courts have jurisdiction to make orders concerning overseas assets: s39(4)(a) Family Law Act 1975 (Cth); s4 Family Law Act 1975 (Cth) (definition of matrimonial cause); s25 FCFCoA Act 2021 (jurisdiction for assets outside of Australia).
Once the parties have made disclosure of an overseas property, the court may decide to make an order adjusting the property interests of the parties taking into account the overseas assets, without necessarily exercising jurisdiction over the overseas assets. This is due to issues with enforcing court orders for overseas property.
Can the Family Law Courts enforce an order regarding overseas assets?
Enforcement of an Australian Court Order that deals with an overseas asset is difficult.
Property settlement orders made in Australia may not be recognised overseas which will lead to problems enforcing the order.
Any orders made in Australia are ‘in personam’ in that the Australian Court can make property orders in Australia requiring an individual to deal with an overseas property, however cannot directly compel that outcome, if the individual refuses to comply with it.
Enforceability will depend on whether the overseas jurisdiction recognises the order made by an Australian Court, and if they do, they will enforce it as if it had been made in that country. The likelihood of this depends on whether that Court chooses to exercise jurisdiction and it is ultimately up to the overseas court as to whether they recognise and enforce an Australian order against an asset in that country.
For example, say there is a property in China, and an order is made by the Court for the Husband to retain the China property and pay the Wife a cash sum, and in the absence of payment, that the China property be sold and the proceeds divided, so as to facilitate the cash payment to the Wife.
The Court has jurisdiction to make an order regarding the property in China, requiring the Husband to sell it, if he does not make the relevant cash payment, however, if the Husband does not comply with the order, the Wife would need to attempt to enforce the order in China, for sale of the property.
For these reasons, when dealing with overseas assets, the Australian court will take into account evidence as to whether the foreign court will recognise the Australian orders.
To avoid the difficulties associated with enforcement of an Australian order in relation to overseas assets, the Australian courts may prefer to take the overseas property into account as an asset, without necessarily exercising jurisdiction over it (i.e. not making an order that involves sale or division of the overseas asset).
By way of example:
- Husband and wife are in the Federal Circuit & Family Court of Australia negotiating a property settlement;
- There is one matrimonial home in Australia subject to a mortgage;
- The Husband also has a property in China;
- The net property pool, including the property in China is valued, and the net property pool, inclusive of Australian assets and overseas assets is identified;
- The Judge ultimately makes an order at trial for:
- The Husband to retain the property in China;
- The former matrimonial home to be sold and mortgage be discharged (as neither can afford to retain the property and pay the other out);
- That the proceeds of sale be divided so as to affect an overall division of the net property pool (inclusive of overseas and australian assets) of 60% to the Wife and 40% to the Husband;
- The Wife receives a higher sum of the sale proceeds of the matrimonial home to account for the fact that the Husband is retaining the property in China, and to affect an overall division of 60%/40% in the Wife’s favour.
The above example reflects a method of the Court taking the China property into account as an asset, without necessarily exercising jurisdiction over it.
Key take aways regarding overseas assets
- The Family Law Courts have jurisdiction to make orders in relation to assets overseas;
- Enforceability of property settlement orders made in Australia in relation to overseas assets may be difficult;
- The ability to enforce an Australian order overseas depends on whether that jurisdiction recognises the order.
- The Court will make orders that are just and equitable, ensuring the assets of the parties in Australia and overseas are into account.
Contact us
If you have recently separated and this article has raised questions for you, please contact us to book a reduced rate consultation with one of our experienced Brisbane Family Lawyers to have a confidential discussion about your individual circumstances.
