What am I Entitled to After Separation?

Posted 7 Sep '21

Property Settlements After Divorce or Separation

Your entitlements in a property settlement depend on a number of different circumstances, and no matter what anyone tells you, everyone’s circumstances are different. If a couple can’t agree about how to divide their assets, and their matter goes to Court, then the Judge will follow the same 4 steps every time to determine what is 'fair' according to the law. These steps are sometimes referred to as "the four step approach".

What is the four step approach in family law?

The four step approach has existed for decades in the Family Law Act, but the High Court case of Stanford & Stanford spelled out each step in full:

Step 1: Determine the asset pool

Step 2: Assess the contributions of the parties

Step 3: Determine each party’s future needs

Step 4: Ensure the division is “just and equitable”

Each step is dealt with below, to help you understand your entitlements. 

Step 1: Determine the asset pool 

What's included in the asset pool? 

The asset pool includes all assets, liabilities and resources of the parties whether they are in joint names or single names of either party. For example, just because one person has savings in a bank account in their sole name doesn’t mean those savings belong to that person. The money in that account is still considered part of the asset pool for distribution. 

Assets include not just real estate and bank accounts, but also vehicles, boats, shares, furniture, business interests, valuable antiques or personal property, and superannuation.

Liabilities include things like credit cards, personal loans, mortgages, and finance over a car or boat.

Resources are usually financial interests that a party can’t access yet, or that they may receive in the future. This includes interests in a trust fund, an inheritance that has not yet been paid, or royalties.

What if my ex won't tell me what assets they have?

Both parties are under an obligation to make ‘full and frank financial disclosure’. The problem is there’s no one to enforce this obligation unless your matter is before the Court. If your ex is refusing to disclose assets then it may be time to consider filing your application with the Court as obtaining an order for disclosure is usually quite straight forward.. 

Once you have a court order, if the other party still refuses, then they are in contempt of Court and penalties range from fines to behaviour bonds and even imprisonment for repeated offences. Even that aside, once your matter is in Court you can issue subpoenas to financial institutions (or any other necessary body) so that they can provide the information directly.

Rest assured there are many ways to get around one party’s refusal to make disclosure. While going to Court is a scary prospect for some, we offer fixed fee services for Court applications, and our expert lawyers can guide you through every step of the way to obtain any procedural orders you need.

Step 2: Assess the contributions of the parties 

How do I figure out who made greater contributions?

When the Court is assessing contributions of the parties, they take into account:

• Contributions at the beginning of the relationship;
• Contributions made during the relationship; and
• Post-separation contributions,

It is important to keep in mind that determining contributions is not a dollar-for-dollar mathematical exercise. You aren't expected to calculate every single thing each of you paid for over many years to see who paid more. The Court takes a general approach, and takes many factors into consideration.

Who made greater contributions at the beginning of the relationship?

Answering this question generally requires looking at what assets or debts each person had at the start. If one party had $1,000,000 and the other party had $10,000 then that is a rather clear example of one party making greater initial contributions. In most circumstances, people enter a relationship on relatively equal footing. They may have some savings, a car and some superannuation. In those cases, initial contributions would be considered equal. 

Who made greater contributions during the relationship?

Contributions during the relationship fall under three main types:

1. Financial contributions;
2. Non-financial contributions (such as a handy partner using their skill to build or renovate a home); and
3. Homemaker and parent contributions.

No one type of contribution is more important than the other. For example, if a couple are together for 10 years and one partner is the primary earner while the other is the primary parent then those contributions would be equal. There are countless other factors which could be considered a contribution on behalf of one party. Contact our expert family lawyers to make sure this step is applied correctly to your circumstances. 

What is a post-separation contribution? 

Post-separation contributions are usually quite obvious. Sometimes a party may receive an inheritance after separation, or maybe one party will use their time and skill to renovate a property and increase the sale price. There could also be negative post-separation contributions where one person wastes or loses money and decreases the value of the joint asset pool. 

After assessing all of the contributions, if it is determined that each party has contributed relatively equally, then at this stage the asset pool would be divided relatively equally. In step 3, this division is then adjusted based on each person's future needs. 

Step 3: Determine each party's future needs

Section 75(2) of the Family Law Act outlines an extensive list of factors that the Court will take into account when adjusting a property settlement in favour of either party.

The common factors which come up in most separations are: 

• The age and state of health of both parties; 
• The income and earning capacity of the parties; and 
• Whether either party has the care of the parties' child or children under 18.

If both parties work full-time but Person A earns $250,000 per year, and Person B earns $40,000 per year, then the court would consider that Person B has greater future needs. 

This means that even though the contributions of the parties may have been equal, the 50/50 division would then be adjusted in favour of Person B. The theory behind this is that it will take Person B a lot longer to get back up to equal footing with Person A, and so they receive a greater share of the assets at separation.

Similarly, if the contributions are equal, but one person has full-time care of the parties' children, then that person has greater future needs. The theory here is that no matter which way you look at it, children are expensive, and so the assets are adjusted in favour of the person who has them. 

Step 4: Ensure the division is "just and equitable" 

What is a just and equitable property settlement?

To determine whether a settlement is just and equitable the Court will consider the practical effect of any asset division. The Court won’t give one party all of the available cash in circumstances where the other party has a lower income. The Court also won’t make an order for one party to have all the motor vehicles where it would leave the other with no way of getting to work. This final step can be simplified to using a common sense approach to make sure any order is ‘fair’ to both parties in all respects.

Advice for Parties 

There’s a belief in the community that when couples divorce the other person “takes half”. This is based more in urban legend than law. There is no automatic 50/50, and the Court doesn’t start from a position of 50/50.

After reading the 4 step process above, you probably have a better understanding of how the law works. If both parties contributed equally to the asset pool, and have equal future needs, then it may be the case that their asset pool is divided 50 / 50. But if not, then it’s unlikely.

It's important to remember that everyone's circumstances are different and the law will apply differently to you than it will to your friend, family or neighbour's separation.

Even if you and your ex are happy to negotiate a settlement privately, it is always important to seek initial legal advice so you know how the law should apply to you. We are experts in family law property settlement and understand the detailed case law behind each of the above steps. Don’t risk losing out on your entitlements – contact us today for advice.

Please note the content of this post is information only and not legal advice.  If you require legal advice it is best to contact one of our lawyers who can review your particular circumstances and then provide tailored advice according to your needs.