In part 2 of TGB's blog series on 40 years of the Family Court in Australia, Diana Dichiera and Meg Allison write about the development of property settlements.
In part 2 of TGB’s blog series on 40 years of the Family Court in Australia, Diana Dichiera and Meg Allison write about the history and impact of the Act on property settlements.
In our first blog in this series we discussed divorce in Australia before and after the Family Law Act 1975 (‘the Act’) and the establishment of the Family Court of Australia in 1976. Before the Act, property settlement was determined under State law, unless the property settlement arose out of divorce proceedings.
Process and considerations
Prior to 1975, property settlements were also influenced by the reason for divorce. If you were at fault for the breakdown of the marriage, you could be penalised by having damages, usually a sum of money, awarded against you. This meant that there was a financial incentive to behave morally during marriage and avoid establishing one of the grounds of divorce such as adultery.
Since the Act simplified divorce and removed the fault based grounds (discussed in Part 1), moral conduct no longer plays a part in determining property settlement.
Instead, the Court will consider your financial and non financial contributions and your future needs. In the leading case of Mallet in 1984, the High Court set out a four step process for determining the division of property settlement. The four step process adopted by family law practitioners is:
1. To determine the assets, liabilities and superannuation entitlements of the parties available for division;
2. To consider the financial and non financial contributions of the parties both at the beginning of the relationship and during the relationship;
3. To assess the future needs of the parties, taking into consideration Section 75(2) of the Act; and
4. Whether the division proposed is just and equitable in all the circumstances.
For a closer analysis of the four step process consider our blog, ‘How are Divorce Property Settlements Determined?’
Recently, the case of Stanford requires the Court at first instance to now consider whether it is just and equitable in the circumstances to make an order for the division of property before contemplating steps one (1) to three (3) above.
What can be divided?
Prior to the Act, and for the first 27 years of its operation, only assets could be split in property settlement. Whilst debts and liabilities could be taken into account, they could not be transferred to the other party as part of property settlement. Superannuation was treated as a financial resource, but could not be split at the time of separation.
From the early 1990s, the Family Court used the ‘West and Green’ formula to split superannuation at the time of retirement of the member. As this was often many years after separation (and sometimes after a second relationship breakdown and property settlement), the split of superannuation was frequently not as fair as the Court intended.
In 2002, changes to the Act enabled the Court to treat superannuation as an asset and make order splitting entitlements between a couple at or about the time of separation. This change to the Act meant that women, who traditionally were the primary carer of children and not working, were not as disadvantaged as occurred previously.
Further changes were made to the Act in 2003 to give the Court the power to distribute debts as well as assets when making orders in property settlement matters. Thus debts of one party accrued during the relationship would be treated as debts of the relationship and taken into account when dividing the net asset pool.
In 2004, the Family Law Rules 2004 (‘the Rules’) were introduced requiring couples to make a genuine attempt to resolve their property dispute before filing Court proceedings. This can be by participating in mediation, counselling, conciliation or arbitration. The requirement can also be fulfilled by attempting to negotiate, either directly or through your lawyer. The Rules require you to put forward a genuine offer (with a set time frame to respond) and to advise the other party that you intend to file Court proceedings if the dispute cannot be resolved. The introduction of the Rules encourages couples to resolve their disputes outside of the Court system.
De facto relationships
When the Family Court was established, it was only able to deal with disputes about the division of property that arose from marriage breakdowns. Property settlements arising from the breakdown of de facto relationships were determined by State courts. The laws in relation to de facto separations were slightly different in each State, so the amount of property you would receive varied depending in which State the matter was heard. The State laws were also quite different to the laws applying to married couples under the Act.
From 2002, in Western Australia, the Family Court of Western Australia was able to deal with disputes about the division of property and maintenance arising from the breakdown of de facto relationships. This meant that property settlement law in Western Australia no longer depended on whether a couple was married or not.
It was not until 2009 that the Act was changed to give the Family Court of Australia the power to deal with disputes about the division of property arising from the breakdown of de facto relationships (including same sex relationships). The law for property settlement in Australia (as briefly outlined above) will now apply in the same way whether you are married or not.
Tindall Gask Bentley is a leading Australian family law firm. For further information or assistance with your family law matter contact us.
Part 1 – Divorce
Part 3 – Parenting and Children
By Diana Dichiera with Meg Allison.