Divorce: Property Settlement & Superannuation Splitting

Background Information

Property settlement involves the parties agreeing or the court making orders that divide the parties' assets between them.

Whilst parties have to wait 12 months from the time that they separate until they can apply for their divorce, they can resolve property matters between them or make an application to the court in relation to property settlement immediately following their separation. Indeed, they can even apply before separation.

However, a divorce does have an effect on whether you can make a property settlement application to the Family Court if you have not already resolved those matters. Once a party has applied for a divorce and a decree absolute dissolving the marriage has been made, the parties only have 12 months from that time to make an application for property settlement and/or spousal maintenance.

The court must identify what the assets of the parties are, what the liabilities of the parties are, and what their financial resources are. Financial resources, means people's superannuation entitlements but can also mean other things.

Whether you are negotiating with the other party to try and reach an agreement as to how to divide your property between you, or it has become necessary for you to commence proceedings in the Family Court, you also need to go through the process of identifying both your and the other party's assets, liabilities and financial resources.

It is sometimes necessary to take steps quite early in the property proceedings to ensure assets are not wasted, or the other party provides you with more information about their financial position. There are applications that can be made to the court in relation to these matters.

After the financial position of the parties is clear, then essentially the court engages in a two step process.

Identifying the respective contributions (both financial and non-financial) of the parties and allocating an appropriate percentage division of the total property.

Considering the matters under Section 75(2) and the other matters referred to in Section 79(4) of the Family Law Act and identifying what, if any, adjustments should be made to the percentage division after taking those factors into consideration.

Whilst it may sound like the process is a simple one, in reality property matters are often complex. There is considerable difficulty in predicting with certainty the likely outcome of an application for property settlement. However, if you obtain legal advice, a solicitor will be able to draw on the considerable experience both in negotiating settlements and conducting trials to advise you in this area.

Some of the matters to be considered when negotiating or making an application for property settlement are as follows:

Superannuation. Considerable changes have been introduced by the Federal Government as to how superannuation will be dealt with. See the Superannuation section later in this Document.

Capital gains tax and stamp duty.

Whether it is appropriate in your circumstances for the property proceedings to be adjourned.

Cases which involve farms.

If there have been inheritances.

Unusual contributions.

Contributions after separation.

Where there are family trusts.

Where parties have been involved in companies.

The decisions you make about property settlement are possibly the most important financial decisions you can make. This Property Issues & Settlement section will provide you with a number of examples of typical property settlement outcomes. The examples are not definitive. They are designed to give you an indication of what you might expect as an outcome.

By better understanding the law and the possible outcomes of a property settlement dispute, you may be able to keep your legal costs down and of course avoid costly mistakes.

What is property?
Make a list of what assets, liabilities and financial resources such as superannuation entitlements you and your spouse have in your name or which are held on your behalf.

Try and obtain documents to prove the existence of those assets, liabilities and financial resources and what their values are now. This proof can be by way of a written, dated appraisal for real estate or other items such as motor vehicle insurance papers, bank statements, credit card statements, superannuation statements etc. Ideally, you want documents to show the value of those items:

• at the date that you started living with the other party;
• at the date that you separated; and
• now (you may need to engage the services of a valuer).

It is very likely that you do not have documents showing the values of all the assets, liabilities and financial resources at those given periods. However you should retain what documents you have and make other enquiries. It may well be through the court process that you can obtain that information and those documents from your partner if you cannot reach an agreement with him/her.

If your partner is unwilling to co-operate or you feel s/he is not being completely honest with you, you would be better protected by commencing proceedings in court.

Time Limit
Your application can be filed as soon as you have separated, indeed even before you have separated, however, an application for property settlement, even one made by consent, must be made within 12 months from the date a Decree Absolute dissolving your marriage has been made.

In very limited circumstances, the court may give you permission to make an application for property settlement after that period expires. However, as a general rule, you cannot rely upon being given permission and must ensure you file your documents within the necessary time period.

The application must be filed at the court within 60 days of the respondent, that is, the other party, signing the application. The 60 day period begins when the respondent signed the application even if you, the applicant, sign after them. This is a strict time limit and the court has no discretion to vary it. You must comply with it.

Who may apply?
The applicant (that is the person applying) and the respondent (that is the other party) must be parties to the marriage. That means they must be married, be separated or be divorced. It also includes parties to a marriage that has been declared void.

At least one of the parties to the proceedings must be present in Australia when the application is filed, or at that time be an Australian citizen or resident.

Superannuation

Until late 2002, a superannuation interest could NOT be split - either by court order or agreement.

Under the previous law, a superannuation interest was NOT treated as property. Rather it was considered to be a "financial resource". The court could - and did - take a superannuation interest into account when it was making a property settlement order. However, it couldn't make an order splitting the interest.

• Superannuation Splitting Laws effective as of 28 December 2002

Family Law Legislation Amendment (Superannuation) Act 2001 (FL Super Act) - the FL Super Act provides for the payment splitting of a superannuation interest.

Under the superannuation splitting laws, superannuation interests are treated as property for the purposes of property settlement on marriage breakdown.

This means that people are able to make an agreement - known as a superannuation agreement - about how, on marriage breakdown, any superannuation interests that either party has are to be split.

A superannuation agreement is like a more general financial agreement in which people can agree about how property other than superannuation is to be divided on marriage breakdown. However, because superannuation interests are different to other property, there are special rules about what a superannuation agreement has to say.

Provided that a superannuation agreement complies with the legal requirements detailed in the superannuation splitting laws, the agreement is binding. If a superannuation agreement is binding, then:

The trustee of a superannuation fund is required by law to implement it; and
The court is not able to make an order about the superannuation interest that is dealt with in the superannuation agreement.

If people are unable to agree, then:

• The court is able to make an order, as part of a property settlement order, about how any superannuation interests are to be split; and
• The court order is binding on the trustee of a superannuation fund, who has to comply with it, provided that the legal requirements have been complied with.

Do the superannuation splitting laws apply to me?
The superannuation splitting laws apply to people who were married and who have divorced. They also apply to people who are still married but who have separated and want to finalise arrangements about their property.

They apply regardless of whether people have divorced or separated before the superannuation splitting laws commence on 28 December 2002 - provided that final arrangements have not been made for their property settlement.

The superannuation splitting laws also allow people to enter agreements, either before or during marriage or after separation, about how, in the event of marriage breakdown, superannuation interests are to be split. People are able to enter into a superannuation agreement before they marry - but the agreement does not have any effect if the parties don't in fact get married.

The superannuation splitting laws do NOT apply to de facto couples. The reason for this is that, under the Constitution, the Commonwealth does not have power to make laws about de facto relationships - it only has power to make laws for people who are, or have been, married.

If you have legally finalised your property arrangements before the superannuation splitting laws commence on 28 December 2002 then, generally, the superannuation splitting laws won't apply to you.

However, if there has been no formal legal arrangement about your property - maybe because you have made an informal arrangement with your former partner - then the superannuation splitting laws do apply to you.

Also, if your property arrangements have been legally finalised but those legal arrangements are subsequently overturned after the superannuation splitting laws commence, then the superannuation splitting laws apply to you.

Disclaimer:

No investment advice provided to you.
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You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.