One of the most common questions we are asked is how the property settlement process works after separation. While every family is different, the Court follows a structured five-step process to determine how property should be divided. Understanding these steps can help you know what to expect and make more informed decisions throughout your property settlement.
Whether your matter is resolved through negotiation, mediation or Court proceedings, the same legal principles generally apply. The Court considers a range of factors, including the assets and liabilities of both parties, the contributions each person has made during the relationship, and each party’s future needs.
At Barton Family Lawyers, we guide our clients through every stage of the property settlement process. Below, we explain the five steps the Court follows when determining a just and equitable property settlement.
Table of Contents
The Five Steps of the Property Settlement Process
The Family Court follows a structured 5 step process when determining how property should be divided after separation.
- Is it just and equitable to make an order altering the parties property interests?
- Determine the net property pool, including all assets, liabilities and superannuation interests of both parties.
- Assess the contributions made by each party throughout the relationship, including at the commencement of your relationship, during your relationship and post separation.
- Consider each party’s future needs including factors such as income, health issues and care of children.
- Determine whether the proposed outcome is just and equitable in all the circumstances.
Each of these steps is explained in more detail below.
STEP ONE – IS IT JUST AND EQUITABLE TO MAKE AN ORDER?
In the case of Stanford v Stanford [2012[ HCA 52, the High Court stated that the Court must first consider whether it is just and equitable to make an order in the circumstances of each individual matter and that this be considered the first step in any property settlement matter.
It is prudent that the parties first consider whether it is appropriate in the circumstances, for the Court to make an order altering the interests of the parties and whether it is just and equitable to do so.
In most cases, the Court is satisfied in making an order because the parties are no longer living together or using common property. It is therefore considered that the parties’ property will need to be divided and their financial relationship brought to an end.
The primary consideration of the Court is:
- whether it is appropriate for the Court to make an order in relation to the property interests of the parties;
- whether there should be an alteration in the parties’ property interests.
If you would like to read further about the first step, and how this came about, you can click here.
STEP TWO – DETERMINE THE NET PROPERTY POOL
Before property can be divided, it is necessary to identify the net property pool. This involves determining all assets, liabilities and superannuation interests belonging to both parties and calculating the overall net value of the property available for division.
To accurately determine the net property pool, both parties are required to provide full and frank disclosure of their financial circumstances.
It is important that we are provided with information in relation to:
- all assets owned by you and the other party, including real property, cars, jewellery, shares, interests in any company or business;
- all liabilities in your name or the other party’s name. This can include student loans, credit cards, home loans and personal or car loans;
- all superannuation interests held by either party, including the current balance of each fund.
The property pool is to be determined as at the current date. A lot of our clients are of the impression that they negotiate based off the pool at the time of their separation, however this is untrue. You are required to provide disclosure of your current circumstances and current values, to determine the current property pool to be divided.
Valuations & Disclosure
If there are any assets where the parties do not agree as to a value, for example one party says the house is worth $500,000 and the other party insists the house is worth $700,000, then it may be the case that valuations are required to determine the value of that asset.
Other assets commonly valued are the family business, furniture, motor vehicles, equipment and other chattels of significant value.
Valuations are usually obtained jointly by the parties, with the costs of any valuation to be shared equally. Once a joint valuation has been obtained, the value of the asset produced by the valuation is then adopted for the purpose of negotiations between the parties.
Valuations and disclosure should occur first, to verify the property pool, before negotiations about division of the property pool can commence.
Once disclosure has been exchanged and valuations have been obtained for assets the value of which is disagreed, we will be able to determine what the net property pool is that is available to divide between the parties and we can then consider making a formal offer of settlement to the other party.
During this stage, it is very important that you are honest with your lawyer, and you disclose all assets and/or liabilities in your name or in which you have an interest directly or indirectly. To discover more about the importance of being honest with your lawyer and why you should not hide your assets, read our article on this topic: Uncover Hidden Assets.
What happens if someone does not provide full disclosure?
Both parties have an ongoing duty to provide full and frank financial disclosure throughout the property settlement process.
If a party fails to disclose assets, understates the value of their property, or attempts to hide financial information, the Court has broad powers to compel disclosure and may draw adverse inferences against that party. In serious cases, a failure to comply with disclosure obligations can result in costs orders or the setting aside of property settlement orders made on incomplete information.
For this reason, it is important that both parties provide complete and accurate financial disclosure from the outset.
If you would like to read further about your Duty of Disclosure and how the disclosure process works, click the link.
STEP THREE – CONTRIBUTIONS
Once the property pool has been determined, disclosure has been exchanged and valuations have been obtained, then it is time to look at the contributions of each party.
First, we look at the initial contributions of each party. These are the assets and liabilities which you came into the relationship with. If one party came in with a significantly higher net position than the other party (e.g. perhaps they owned a property with a large amount of equity in it), then their contributions to the property pool may be considered greater than the other party (e.g. 55%/45% or 60%/40%).
Initial contributions may have less weight over the course of a longer relationship and more weight in a shorter relationship. It all depends on the size of the initial contribution, how it was utilised, the length of the relationship and the nature of the contributions by the other party during the relationship.
Secondly, we look at financial and non-financial contributions that the parties have made during the relationship, directly and indirectly, to the property pool that exists today. This will include the income earnt by the parties throughout the relationship and how each party’s income was used, who was the breadwinner and who was the homemaker, who cared for the children and any other contributions which have impacted the value of the property pool directly or indirectly, for example, renovations to the home completed by one of the parties.
Lastly, we consider any contributions that have been made post-separation, including contributions to mortgage repayments and other interest earning debt.
It is important to seek advice from our experienced family lawyers in relation to the relevance of contributions made by each of the parties and the impact of those contributions on your just and equitable entitlements.
STEP FOUR – FUTURE NEEDS
The future needs of each party is another important stage in determining your just and equitable entitlements.
Future needs considerations include, for example:
- the parties’ current ages
- the parties’ current health and whether they suffer any serious health conditions which may effect them in the future
- the parties’ current income and future income earning capacity
- care arrangements for any children and their relevant ages or needs
For example, if Party A has primary care of the children, only has capacity to earn $40,000 per annum working part time due to care of the children and one of those children has high needs, whilst Party B has care of the children on alternate weekends, earns $150,000 per annum and is of good health – then our family lawyers may advise that Party A would receive an adjustment in their favour as Party A has a higher future need for the property pool than Party B. The adjustment given in the particular circumstances will also vary depending on the number of children, the ages of the children and the size of the property pool to be divided between the parties.
We suggest seeking advice from our Brisbane Family Lawyers in relation to how your future needs might compare to the other party’s and what kind of adjustment might be made in your individual circumstances.
STEP FIVE – JUSTICE AND EQUITY
This is the hard part, and this is where our Brisbane Family Lawyers come in, to provide you advice in relation to what would be a just and equitable settlement in all of the circumstances, taking into account steps 1 – 4 above.
It is not only important to assess whether the agreement reached is fair, but also to consider whether the agreement reached is practical and all facts have been considered. The Court must also consider the actual order itself, not just the percentage division – for example, who retains what in the property settlement and whether that is practical and achievable.
Our lawyers have prepared a very helpful article regarding justice and equity which you can read by clicking on this link.
The Court is unable to make an order in relation to the division of property unless it is satisfied that the order is just and equitable: section 79(2) Family Law Act 1975 and section 90SM(3) Family Law Act 1975.
This is the first and also the final step of any property settlement matter.
How Long does the Property Settlement Process Take?
The timeframe for a property settlement depends on the complexity of the matter and whether the parties are able to reach an agreement.
Where both parties exchange financial disclosure promptly and negotiate constructively, many property settlements can be resolved within a matter of months. More complex matters involving businesses, trusts, multiple properties or disputed valuations may take considerably longer.
If Court proceedings become necessary, the process may take significantly longer depending on the complexity of the case and the Court’s timetable.
Seeking legal advice early, exchanging disclosure promptly and making genuine attempts to negotiate can often help resolve a property settlement more efficiently.
Can a Property Settlement Be Resolved Without Going to Court?
Yes. Most property settlement matters are resolved through negotiation without the need for a Judge to decide the outcome.
Once both parties have exchanged financial disclosure and obtained any necessary valuations, negotiations can begin. This may occur directly between the parties, through their lawyers, or at mediation.
If an agreement is reached, it is important that it is properly documented so it becomes legally binding. This is commonly achieved by filing Consent Orders with the Federal Circuit and Family Court of Australia or, in some circumstances, entering into a Binding Financial Agreement.
If an agreement cannot be reached, Court proceedings may become necessary. Even then, many matters continue to negotiate and settle before reaching a final hearing.
Frequently Asked Questions
Can we reach a property settlement without going to Court?
Yes. Most property settlement matters are resolved through negotiation, mediation or lawyer-assisted discussions without the need for a final Court hearing.
How long after separation can I apply for a property settlement?
If you were married, you generally have 12 months from the date your divorce becomes final to commence Court proceedings for a property settlement. If you were in a de facto relationship, you have 2 years from the date of separation.
Is superannuation included in a property settlement?
Yes. Superannuation forms part of the overall property settlement process and is taken into account when determining a just and equitable division of property. However, it is treated differently to other assets because it cannot usually be accessed until retirement or another condition of release is met.
What if my former partner is hiding assets?
Both parties have a legal obligation to provide full and frank financial disclosure. If a party fails to disclose assets or financial information, the Court has powers to compel disclosure and may impose significant consequences.
Do I need a lawyer for a property settlement?
While it is possible to negotiate a property settlement without legal representation, obtaining legal advice can help you understand your entitlements, identify potential risks and ensure any agreement is properly documented and legally binding.
Need Advice About Your Property Settlement?
Every property settlement is different. While the five-step process remains the same, the outcome in each matter depends on the individual circumstances of the parties, including the size of the property pool, the contributions made during the relationship and each party’s future needs.
Obtaining legal advice early can help you understand your entitlements, avoid common mistakes and develop a strategy to resolve your matter as efficiently and cost-effectively as possible.
Our experienced Brisbane family lawyers regularly assist clients to negotiate property settlements, prepare Consent Orders and represent clients in the Federal Circuit and Family Court of Australia when litigation becomes necessary.
If you would like tailored advice about your circumstances, contact Barton Family Lawyers on (07) 3465 9332 to arrange a reduced-rate initial consultation with one of our experienced family lawyers, to discuss your individual circumstances.
