In the sad event that a marriage or de facto relationship comes to an end, one of the most contentious areas when it comes to the disentangling of two lives is the property settlement.
In particular, the issue of contributions by each party to the relationship can become a common sticking point in any division of assets and liabilities. Contributions can consist of both financial and non-financial inputs into the former union.
There is no set formula for assessing these contributions – each case must be assessed on its unique circumstances to achieve a just and equitable division of property between the parties.
This article provides some more detail on how contributions in a relationship are assessed by a court but if you are at the stage where a property settlement is required to properly end a former relationship, contact Mediations Australia as soon as possible.
More detail on contributions
As we’ve mentioned, contributions considered in an asset pool as part of a property settlement can be both financial and non-financial.
Financial contributions: In a relationship, these may be direct or indirect in the acquisition, conservation or improvement of any property of the parties. Financial contributions before, during and after the marriage or relationship may be considered.
One party may have property when they enter the relationship, for example. Whether this property becomes part of the asset pool to be divided in a property settlement will depend on how the property is used during the relationship and what contributions to the property the other party makes.
During the marriage, an inheritance received by one spouse, for example, will generally be considered part of the asset pool. As will career assets such as income, superannuation, long-service leave or a redundancy payment, as well as shareholdings.
In relation to property acquired after a separation, the interest of the ex-partner who owns the property is balanced against the other partner’s contribution to it before deciding whether it is added to the asset pool. Another method of assessment takes a broader approach and looks at all contributions made by the ex-partner (the one who doesn’t own the property) to common matters between the parties.
Under section 79(4)(a) of the Family Law Act 1975, the court must assess both direct and indirect financial contributions. An example of a direct contribution is a lump sum paid against a mortgage, while an example of an indirect contribution is the use of earnings to meet household expenses. The court often deals with the situation where one party to the relationship pays the mortgage and the other meets household expenses from their earnings, complicating the assessment of how much each party contributed to the acquisition, conservation or improvement of a property.
Non-financial contributions: Examples of these contributions include where one party to the relationship has improved the family home by using their own labour (renovating, painting, gardening, landscaping, e.g.), as well as their contributions as a parent and a homemaker.
These contributions have come to be seen as no less important than financial contributions in family property settlements. Evidence of these contributions will be assessed by the court and given a percentage value, which is then added to the overall contribution that the court believes each party made to the relationship.
How is this information used?
The assessment of contributions to the former relationship is one question in a number the court asks to determine a property settlement.
The court first determines the assets and liabilities of the parties to the relationship to form an asset pool for division; assesses the contributions of each party; assesses the ‘future needs’ of each party, and finally asks whether the proposed division of property and assets is ‘just and equitable’.
It’s important to note that when assessing contributions, the length of a relationship can be a significant factor. Where a couple were together for five years or more, the court will take a more holistic view of how assets from the relationship were acquired and maintained – more recent contributions may be allocated greater weight than older or initial contributions due to the passing of time ‘blending’ an ex-couple’s interests.
In relationships of shorter duration, contributions are more likely to assessed on a case-by-case basis.
Seeking expert advice
In Mediations Australia, family law is one of our specialties. Reaching a property settlement when a relationship ends is a stressful experience and understanding what you may be entitled to can be confusing.
We can help give you a better picture of what is entitled to ask for in a property settlement, in particular by assisting you to understand the value of your contributions to the relationship. Contact us Mediation today.