Property settlements - How the Family Court decides
How does the Family Court make decisions about property settlement?
The Family Court generally follows a five-step process when deciding how assets and liabilities will be divided:
- Work out what property there is and the value of the property
- Decide if there should be a property settlement
- Look at the contributions each person has made (this includes, financial, non-financial, homemaker and parent contributions)
- Look at the future needs of each person, and
- Check the property settlement is 'just and equitable' (fair).
When does the Family Court follows the five-step process?
The Family Court follows this five-step process when:
- hearing a court case about property matters, and
- deciding if an agreement reached between people outside of court is fair.
When people reach their own agreement about property settlement and file an Application for Consent Orders (Form 11) with the Family Court, the court must be satisfied the property settlement is fair before it will make orders in terms of the agreement.
Step 1: Work out what property there is and the value of the property
The first step the Family Court will generally take is to work out what the asset pool is and the value of the pool. An asset pool is the collection of all assets and liabilities belonging to each person. To work out what property is part of the asset pool, the court will rely on the information that has been disclosed by each person.
Disclosure is the legal term used to describe the process of people sharing information about their assets and liabilities. This is an important part of a property settlement as the court needs to have a clear picture of the assets and liabilities of each person.
The court will look at the value of the assets and liabilities at the time of the court proceedings, not what they were valued at the time of separation.
Step 2: Decide if there should be a property settlement
The second step the court will generally take is decide whether it is 'just and equitable' (fair) to become involved and make changes to people's property. This is because there is no automatic right to a property settlement following a relationship breakdown.
In most cases where two people were married or in a de facto relationship and shared finances, this step will be satisfied.
Some of the reasons why the court may decide it is not fair to divide property include:
- if the relationship was very short
- if finances were kept separate during the relationship and not mixed
- if a long time has passed since separation (in cases where married couples have separated but not divorced), or
- if the asset pool is small and there is not much to be divided.
Step 3: Look at the contributions each person has made
The third step the Family Court will generally take is look at the contributions each person has made. This is an exercise in looking at the past - who brought what into the relationship and when. The Family Court then makes adjustments to the percentage of the property pool each person will receive taking into account each person's contributions.
There are three main kinds of contributions a person can make:
- financial contributions
- non-financial contributions, and
- contributions as a homemaker and parent.
Financial contributions can include:
- real estate, savings, motor vehicles and superannuation owned by a person
- income earned by a person
- payouts received by a person (for example, motor vehicle accident compensation, redundancy payout, workers compensation payout), and
- inheritance or gifts received by a person.
Non-financial contributions are usually in the form of one person's labour improving the value of a property through renovations. The renovations should lead to a significant increase in the value of the property and need to be more than general maintenance or decoration.
Contributions as homemaker and/or parent include cooking, cleaning, maintaining the parties' property, and raising children. Contributions made as a parent are generally given equal value to financial contributions. For example, if one parent has worked full time during the relationship and the other parent has stayed at home to care for children from the relationship these contributions will be treated as equal.
The timing of when contributions are made is important
The timing of when contributions are made is important because the Family Court will treat these in different ways.
The Family Court will look at:
- contributions made at the start of the relationship
- contributions made during the relationship, and
- contributions made after separation.
The assets and liabilities each person already has at the start of the relationship are known as 'initial contributions'. Initial contributions are not given a dollar-for-dollar value in a property settlement. For example, one or both people may already own real estate, motor vehicles or have superannuation that they bring into the relationship. A person who brings in a property with $100,000 equity at the start of the relationship will not automatically receive a $100,000 credit in a property settlement following separation. This is especially the case in long relationships, where one person's contributions are likely to be balanced out over time by the other's person's contributions during the long relationship.
Financial contributions made during the relationship can be anything that is purchased or earned by either person in the relationship. A person's contributions as a parent are impossible to value as a dollar amount. Instead, the law says that these contributions are equal to, or just as significant as, a person's financial contributions.
Contributions made after separation are known as 'post separation contributions'. These contributions can be anything that is purchased or any debt created by either person after their relationship has broken down.
It may be possible for contributions made after separation to either be kept out of the asset pool or put in a separate pool that the court looks at. You should get specific legal advice about this situation as it is complex.
Step 4: Look at the future needs of each person
The fourth step the Family Court will take is to look at the future needs of each person to see if there should be any adjustment to the percentages to ensure the property settlement is fair. This is an exercise in looking forward - what does each person need in the future?
A common example of when an adjustment is made to take into account the future needs of a person is when one person is the primary carer of young children from the relationship and caring for the children impacts on their ability to work to earn an income.
The law about property settlements sets out a list of things to be taken into account by the Family Court when looking at the future needs of each person. Some of the common things the Family Court considers include:
- the age and health of both people
- the income, property and financial resources of both people
- the physical and mental capacity for employment of both people
- whether either person has care of a child under the age of 18 years, and
- any other facts or circumstances which should be taken into account.
Section 75(2) of the Family Law Act 1975 sets out the full list of things the Family Court considers when looking at each person's future needs.
Step 5: Check the property settlement is fair and just
The fifth and final step the Family Court will take is look at the proposed property settlement as a whole and the impact it will have on each person to decide whether the division is fair.
Family Court of WA website
Information about the principles that guide the Family Court when making decision about property.
What you need to do before starting a property case in the Family Court.
Making an application - Property and Financial Orders
Information about the forms you need to complete to start a property case.
Information Kits and Brochures - Property and Financial
Kits and brochures on important topics for property cases in the Family Court.
Self-Represented Litigants Handbook for Property Cases
A resource designed to help people who are representing themselves in a property case in the Family Court.
Reviewed: 20 January 2021