How Do De Facto Couples Split Assets in Australia?
Separating from a long-term partner is never easy, and the process of dividing assets can be emotionally and financially challenging. For de facto couples in Australia, understanding the legal framework for property division is crucial to ensure a fair and equitable outcome. This article will guide you through the key aspects of de facto property settlement, including the relevant legislation, factors considered by the court, and the steps involved in the process.
Understanding De Facto Relationships in Australia
Definition of a De Facto Relationship
In Australia, a de facto relationship is defined as a couple living together on a genuine domestic basis, without being legally married. This includes both heterosexual and same-sex couples. The Family Law Act 1975 (Cth) governs the division of assets for de facto couples who separate.
Criteria for Establishing a De Facto Relationship
To be considered a de facto couple, you must meet certain criteria, such as:
- Living together for at least two years (unless there are exceptional circumstances).
- Having a child together.
- Registering your relationship under state or territory laws.
- Demonstrating a commitment to a shared life, including financial interdependence, shared property ownership, and public recognition of your relationship.
Same-Sex De Facto Couples’ Rights
Since the 2008 amendments to the Family Law Act, same-sex de facto couples have the same rights as heterosexual de facto couples regarding property division. The landmark case of Jonah & White [2011] FamCAFC 221 confirmed this equal treatment under the law.
The Legal Framework for De Facto Property Division
Family Law Act 1975 (Cth) Section 90SM
Section 90SM of the Family Law Act 1975 (Cth) empowers the court to make orders altering the property interests of de facto partners. This section applies to de facto couples who separated after 1 March 2009, when the amendments to the Act came into effect.
Factors Considered by the Court
When deciding on a property settlement, the court considers various factors, including:
- The financial and non-financial contributions of each partner to the acquisition, conservation, or improvement of the property.
- The contributions of each partner to the welfare of the family, including homemaking and parenting.
- The effect of any proposed order on the earning capacity of either partner.
- The duration of the relationship and the extent of common residence.
- The financial circumstances of each partner.
- Any child support obligations.
- The need to ensure a just and equitable outcome.
Time Limits for Application
De facto couples must apply to the court for property orders within two years of their separation. If you miss this deadline, you will need to seek special permission from the court to proceed with your application.
The Property Division Process for De Facto Couples
Identifying and Valuing the Asset Pool
The first step in the property division process is to identify and value all assets and liabilities held by either partner, whether jointly or individually. This includes real estate, vehicles, investments, superannuation, and any debts or loans. For assistance, consider options for Property Settlement Mediation to help resolve disputes that may arise.
Assessing Contributions (Financial and Non-Financial)
Next, the court will assess each partner’s contributions to the acquisition, maintenance, and improvement of the assets. Financial contributions include income, savings, and investments, while non-financial contributions encompass homemaking, parenting, and renovations.
Considering Future Needs and Adjustments
The court will then consider the future needs of each partner, taking into account factors such as age, health, income-earning capacity, and care of children. Adjustments may be made to the property division to ensure a fair and equitable outcome.
Achieving a Just and Equitable Division
The ultimate goal of the property division process is to achieve a just and equitable division of assets between the de facto partners. This may result in an equal split or a division that favors one partner based on their greater contributions or future needs.
Common Scenarios and Case Studies
Scenario 1: Long-Term De Facto Relationship with Children
Sarah and Tom were in a de facto relationship for 12 years and have two children together. Sarah was the primary caregiver and worked part-time, while Tom worked full-time and provided the majority of the family’s income. Upon separation, the court considered Sarah’s significant non-financial contributions and her future needs as the primary carer of the children, resulting in a 60/40 split of assets in her favor.
Scenario 2: Short-Term De Facto Relationship with Unequal Contributions
Lisa and Mark were in a de facto relationship for three years. During this time, Lisa purchased a property using her savings and a loan in her name. Mark contributed to household expenses but did not make any direct financial contributions to the property. The court found that Lisa made greater contributions to the acquisition of the property and ordered a 70/30 split in her favor.
Scenario 3: De Facto Relationship with a Family Business
Emma and David were in a de facto relationship for eight years and ran a successful family business together. Emma managed the administrative side of the business, while David handled the day-to-day operations. Upon separation, the court considered their equal contributions to the business and ordered a 50/50 split of the business assets.
Frequently Asked Questions
The Basics
What if we can’t agree on a property settlement?
If you and your former partner cannot reach an agreement on property division, you can attend mediation or apply to the court for a property order. The court will then decide on a just and equitable division based on the factors outlined in the Family Law Act. For mediation options, consider reaching out to Accredited Family Law Mediators.
Do I need a lawyer for de facto property division?
While it is not mandatory to have a lawyer, seeking legal advice can help you understand your rights and obligations and ensure a fair outcome. A family law specialist can guide you through the property division process and represent your interests in court if necessary. For a list of qualified experts, refer to Family Law Practitioners.
What happens to superannuation in a de facto split?
Superannuation is treated as property under the Family Law Act and can be divided between de facto partners as part of a property settlement. The court can make orders splitting superannuation or offsetting it against other assets. For more information on this topic, see What Happens To Superannuation If I Separate Or Divorce.
How does property division differ for married vs. de facto couples?
The legal principles and factors considered in property division are largely the same for married and de facto couples under the Family Law Act. However, married couples must apply for a divorce before finalising property orders, while de facto couples can apply for property orders without the need for a formal divorce.
Eligibility and Legal Framework
What qualifies as a de facto relationship in Australia? A de facto relationship exists when two people live together as a couple on a genuine domestic basis, but are not married or related by family. The court considers factors including the duration of the relationship, living arrangements, sexual relationship, financial arrangements, care and support of children, public aspects of the relationship, and the degree of commitment to a shared life.
How long must a de facto relationship last to claim property settlement? Generally, you must have been in a de facto relationship for at least two years to apply for property settlement. However, there are exceptions: if there’s a child of the relationship, if you made substantial contributions that would result in serious injustice if no order was made, or if the relationship is registered under state or territory law.
Can same-sex de facto couples split assets? Yes, same-sex de facto relationships have the same legal rights to property settlement as opposite-sex relationships. The Family Law Act applies equally to all de facto couples regardless of gender or sexuality, provided the relationship meets the legal criteria.
What’s the difference between de facto and married couples’ property rights? The legal principles for property settlement are essentially the same for both de facto and married couples. However, de facto couples must first establish that their relationship qualifies legally, and there are stricter time limits for making applications after separation.
Asset Division Principles
How are assets divided between de facto partners? Australian courts use a four-step process: identify and value the property pool, assess each party’s financial and non-financial contributions, consider future needs factors, and ensure the overall result is just and equitable. There’s no automatic 50/50 split – each case is decided on its individual circumstances.
What counts as ‘property’ in a de facto relationship? Property includes real estate, bank accounts, superannuation, shares, business interests, cars, furniture, jewellery, and debts. Both assets and liabilities acquired before, during, and sometimes after the relationship may be included in the property pool, depending on their connection to the relationship.
Are assets acquired before the relationship included? Pre-relationship assets may be included in the property pool, but the contributing party typically receives greater recognition for bringing these assets into the relationship. The longer the relationship and the more the assets have been used for joint purposes, the more they may be treated as relationship property.
How are debts handled in property settlement? Debts are included in the property pool as negative assets. The court considers who incurred the debt, whether it benefited the relationship, and each party’s capacity to service debts. Joint debts are typically shared, but personal debts may remain with the person who incurred them.
Types of Contributions
What are financial contributions? Financial contributions include income earned during the relationship, assets brought into the relationship, gifts or inheritances received, and direct financial contributions to acquiring, maintaining, or improving property. Both parties’ financial contributions are assessed throughout the relationship.
What are non-financial contributions? Non-financial contributions include homemaking, parenting, caring for family members, maintaining property, renovations or improvements done personally, and supporting the other party’s career or business. These contributions are valued equally with financial contributions.
How is homemaking valued in property settlement? Homemaking and childcare are recognised as valuable contributions equal to financial contributions. Courts acknowledge that enabling one partner to earn income while the other manages the home and children benefits the relationship financially and should be fairly recognised in property division.
What if one partner sacrificed their career? Career sacrifices are recognised through both contribution and future needs assessments. The court considers lost earning capacity, reduced superannuation, and impacts on future employability. The partner who sacrificed career opportunities may receive a larger property settlement to compensate.
Future Needs Factors
What are ‘future needs’ in property settlement? Future needs factors adjust the property division based on each party’s circumstances going forward. These include age and health, income earning capacity, care of children, standard of living during the relationship, and any other relevant factors affecting future financial security.
How does having children affect asset division? The primary carer of children often has greater future needs due to reduced earning capacity and ongoing child-related expenses. This may result in a larger share of the property pool to ensure adequate housing and financial security for the children.
Can health issues affect property settlement? Yes, significant health issues that affect earning capacity or create additional expenses are considered as future needs factors. Medical conditions, disabilities, or mental health issues that impact financial independence may result in a larger property settlement.
What if there’s a significant age difference? Age differences may be relevant if they affect earning capacity, retirement planning, or life expectancy. An older partner approaching retirement may have different future needs than a younger partner with decades of earning potential ahead.
Superannuation
Is superannuation included in de facto property settlement? Yes, superannuation is considered property and can be split between de facto partners. You can apply for superannuation splitting orders at the same time as property settlement orders, or separately if needed.
How is superannuation valued and divided? Superannuation is valued at the date of separation or hearing. It can be split by percentage, dollar amount, or by creating separate interests. The court considers contributions to the growth of superannuation and future needs when determining appropriate splitting.
Can I access my ex-partner’s superannuation immediately? Generally no – splitting orders create separate superannuation interests, but you typically can’t access funds until you meet normal superannuation conditions of release (such as retirement age). However, financial hardship provisions may apply in exceptional circumstances.
Practical Process
When should I start property settlement proceedings? You should commence proceedings within two years of separation. Acting early helps preserve evidence, prevents asset dissipation, and allows more time for negotiation. Seek legal advice as soon as possible after separation to understand your rights and options.
Do we have to go to court to divide assets? No, many de facto couples resolve property matters through negotiation, mediation, or collaborative law without going to court. Court proceedings are typically a last resort when parties cannot reach agreement. Alternative dispute resolution is often faster, cheaper, and less stressful.
What information do I need to gather? Collect financial records including bank statements, tax returns, property valuations, superannuation statements, business records, loan documents, and evidence of contributions. Comprehensive financial disclosure is required whether negotiating privately or through court proceedings.
How long does property settlement take? Timeframes vary significantly depending on complexity, cooperation between parties, and court availability. Simple matters resolved by agreement might take months, while complex contested matters can take years. Most cases settle before reaching final hearing.
Common Challenges
What if my ex-partner is hiding assets? If you suspect asset concealment, seek legal advice immediately. The court has powers to compel disclosure, and deliberately hiding assets can result in serious consequences including adverse property orders and cost penalties. Forensic accounting may be necessary in complex cases.
Can property be sold during separation? Generally, neither party should dispose of significant assets during separation without agreement or court order. If you’re concerned about asset dissipation, you may need to seek urgent court orders to preserve property pending final settlement.
What if we can’t agree on property values? Professional valuations may be necessary for real estate, businesses, or other significant assets. Parties can agree to use joint experts or each obtain separate valuations. The court will determine appropriate values if parties cannot agree.
How are family gifts and inheritances treated? Gifts and inheritances are usually treated as contributions by the recipient, but may be shared if they’ve been used for joint purposes or the relationship was long. Recent inheritances close to separation may be treated differently than those received early in the relationship.
Business and Complex Assets
How are business interests divided? Business interests are valued as at separation or hearing date. Options include selling the business and dividing proceeds, one party buying out the other’s interest, or continuing joint ownership with appropriate agreements. Professional business valuations are typically required.
What about intellectual property or professional practices? Professional practices, intellectual property, and other complex assets require specialist valuation. Factors include goodwill, future earning potential, and restrictions on transfer. These assets often require expert evidence and careful legal consideration.
Can I claim an interest in my partner’s business? You may have an interest if you contributed to the business financially or non-financially, or if business growth during the relationship was due to joint efforts. Working in the business, providing support, or sacrificing your own career may create property interests.
Final Considerations
Are property settlement agreements legally binding? Agreements should be formalised through consent orders or binding financial agreements to be legally enforceable. Informal agreements may not be binding and can be difficult to enforce if one party doesn’t comply.
Can property settlement be reopened after finalisation? Generally no – property settlement orders are final. However, in exceptional circumstances involving fraud, duress, or material non-disclosure, it may be possible to set aside orders. This is rare and requires strong legal grounds.
What if we reconcile after starting property proceedings? Reconciliation doesn’t automatically stop proceedings, but parties can discontinue or suspend them. If reconciliation fails and you separate again, previous proceedings may be reactivated, but seek legal advice about time limits and changed circumstances.
Should I get legal advice for de facto property settlement? Yes, legal advice is highly recommended given the complexity of property law and significant financial consequences. Even if you negotiate directly with your ex-partner, legal advice helps ensure you understand your rights and achieve a fair outcome.
Next Steps for De Facto Couples Splitting Assets
Seeking Legal Advice
If you are separating from your de facto partner and need to divide your assets, it is essential to seek legal advice. Talk to one of our family lawyers today. They can help you understand your rights, obligations, and the likely outcome of your property settlement.
Negotiating a Property Settlement
Where possible, try to negotiate a property settlement with your former partner through open and honest communication. This can save you time, money, and emotional stress compared to going to court. Consider attending mediation to help you reach an agreement. Of course, at Mediations Australia, this is something we can help with.
Applying to the Court
If you cannot reach an agreement with your former partner, you may need to apply to the court for property orders. Ensure you do this within two years of your separation and seek legal representation to protect your interests. For more information on property settlements, check out How Property Settlements Work.
Conclusion
Splitting assets after a de facto relationship breakdown can be a complex and emotional process. By understanding the legal framework, factors considered by the court, and the steps involved in property division, you can work towards a fair and equitable outcome. Remember to seek legal advice, communicate openly with your former partner, and prioritise the well-being of any children involved. With the right approach and support, you can navigate this challenging time and move forward with a just property settlement.
