Family Court’s approach to property settlement
The guiding principle of property settlement is that it must be just and equitable and that it is appropriate for the court to make orders altering the existing property rights of the parties due to a marriage or De Facto relationship. In Perth property settlement proceedings, the court may make such Orders it considers appropriate, altering the interests of the parties to the marriage or De Facto claims in the property, not what other people, family members or colleagues and friends say.
In property settlement , there is often a dispute between parties as to the identity of assets or extent of assets, the value of assets and assets which may have been disposed of or dissipated either before or after separation. In determining a dispute to property settlement, the Court considers 4 steps. Below is a summary of how the Family Court would approach a property settlement.
What are the assets and liabilities of the parties?
The above question is answered by looking at the asset pool involved. The net asset pool is simply the party’s assets minus their liabilities. The list of assets and liabilities may include:
Property to which a party is entitled is defined to mean every possible interest a party can have and the courts power to alter the parties interest in all their property is regardless of when or how it was acquired and in whose name it is owned. Property has been held to include:
The realisation expenses and capital gains tax are deducted from the pool for investment properties although the court held in one case (Blake ) that capital gains tax allowances should only be made on properties intended to be sold immediately.
Why valuations of property in Family Court are important
In situations where parties do not agree as to the value of their property, a valuation is required. If a court is in doubt over different valuations it may order the sale of the property. Land is to be valued for its highest and best use value including its development potential. The principle also applies to plant and equipment which should be valued for continuous use. In certain situations, property appraisals may be enough to give an indicative figure of the property’s worth.
What the Court held not to be property
Non-transferable licences or rights and choses in Action such as a partnership interests which are not wholly or partially assignable are considered property, but a partnership in a law firm assignable with partners consent was held to be property by the court. Expected inheritance from living testator and capacity to borrow money was not considered to be property. Other things held by the court not to be property are:
The following interests have been held not to be property for inclusion in the asset pool but a financial resource for consideration under section 75 (2):
The family court will also have regard to the resources of a party or the benefits which may flow to the party pursuant to a trust or other family structure. The family court has power or jurisdiction to deal with any asset which is:
Separate asset pools
In certain situations, inheritance received late in a relationship or post separation can be treated as a separate asset pool.
Notional Property Added Back
The court has also recognised the concept of “notional property or add backs.” This concept means the Court may add back to the asset pool, those assets which:
The notional add back approach is used as an exception and not the rule by the court.
In determining the net asset pool , the court also considers the liabilities which may arise upon their division, transfer or sale of any assets. However they are exemptions available and some rollover relief on the transfer of assets between spouses or entities in which spouses have an interest in each case is different.
Effect of non-disclosure of assets in property settlement
The Family Court may make an order going beyond the identified property of the parties upon proof that a party has not made full and frank disclosure of their assets. A party to a property proceeding where there has been non-disclosure may apply to the Court for a matter to procced on an undefended basis.
Once the asset pool has been identified, the Court’s role is to identify the types of contributions made by the parties to a relationship at the commencement, during and after their relationship has ended. At this stage the Court applies a percentage of that pool as an assessment of the parties contributions.
Types of contributions
Asset by asset approach to contributions
While a global approach is adopted in most cases an asset by asset approach may be taken in some cases. An asset-by-asset approach may be taken in the case of:
The Court’s determination of property settlement requires it to take into account and give appropriate weight to the initial contributions of the party. After that, the Court is required to consider the needs of each party and the factors known as “future needs.” In the case of a financially weaker party, the court will add a percentage of the asset pool to the contribution’s assessment for any relevant section 75 (2) factors. Alternatively, a specified amount may be awarded.
Section 75(2) Factors
These factors include those stated below:
Economic and other consequences of divorce
The Court in certain circumstances is required to take into account the consequences of divorce and circumstances flowing on from that including any gaps between theory and real reality for employment especially for people in middle age lacking experience and confidence and who have been out of skilled workforce for many years. The Family Court also recognises and gives effect to certain situations where there was an acquisition and development of a party’s professional skills resulting in present high- or middle-income earning capacity acquired during the marriage. For example, this could occur at the same time during which the wife could have sacrificed her professional skills and stayed home to care for the family and income opportunities foregone by reason of responsibilities to the children.
Other Section 75(2) Factors – contributions to other party’s child
The Court can award an adjustment in favour of the contributing party where a party provided financial, non-financial or welfare contributions to a child of the other party who is not their biological child. For example the payment of private school fees for the other party’s child can be taken into account.
Effect of proposed order on a party’s earning capacity
As part of its balancing Act in determining property settlement and division of the party assets, the Court is required to consider the effect of any proposed order on the earning capacity of either party to the marriage. For example an order which would deprive a party substantially of what he or she is entitled to by reason of contribution would not normally be considered just and equitable.
Treatment of superannuation of the parties
Property orders may include superannuation interests of spouses or De Facto partners. The Family Law Act enables valuation of the true worth of a superannuation interest of a party and empowers the court to make a splitting order requiring payments under a superannuation policy to be allocated between the member and the non-member spouse.
Superannuation splitting orders
Superannuation is an asset and can be taken into account in property settlement.
The Family Court may make the following orders in relation to a superannuation interest other than an unsplittable interest:
Step 4- what orders should be made for a just and equitable outcome?
This is the final assessment stage once the asset pool has been identified, contributions and section 75 (2) or s90 SF(3) are assessed. This step is not an opportunity to make a further adjustment, it is however an opportunity for the court to determine finally how in reality a just and equitable order might be achieved based on the circumstances of the case before it. However the court may adjust its assessment of steps two and three because of its likely impact on a party’s financial position and where a split of superannuation is available, may adjust the assets each party is to receive.
It is important to note that “the outcome” must be just and equitable overall for both parties not just for one of them.
What is meant by the “just and equitable” requirement?
The court can not make an order to alter the property interests of the parties unless it is satisfied that in all circumstances it is just and equitable to make such an order.
The Court, when considering what order should be made, takes into account the following:
Future needs or section 75(2) Factors taken into account by the Family Court
What About Capital Gains Tax, GST And Stamp Duty?
In determining the division of assets between parties , the court is required to consider the general principles for the proper approach to the effect of potential capital gains tax payable upon the sale of an income earning (investment) property when necessary. The guidelines below are applied whenever necessary by the Court as the justice and equity of each case requires:
KEY FEATURES OF CAPITAL GAINS TAX (CGT)
Roll-over relief is available where an asset is transferred under a property Order or for a financial agreement between spouses or from a trustee to a spouse. Roll – over relief means the deferral of CGT liability until the transferee eventually disposes of the asset. The transferee is taken to have acquired the asset when the transferor did so the transferee’s eventual disposal of the assets:
Division 7A of the Income Tax Assessment Act 1936 (known as Division 7A)treats (deems) amounts paid or lent or debts forgiven by a private company to a shareholder or shareholders’ associate as dividends. Associate includes a shareholder’s spouse. This treatment takes into account the amounts income of the shareholder or associate. Exceptions include debt repayment and certain business loans.
Goods and services tax
GST is governed by a New Tax System (Goods and Services) Act 1999 (known as the GST Act). GST ruling 2003 /6 explains the GST be consequences of a transfer to a spouse over an enterprise asset of their spouses or either of them or a related entity registered or required to be registered for GST as a result of a property distribution under the family law Act. Enterprise asset is defined to include trading stock plants office equipment motor vehicles on real property. However it is imperative to seek advice from a tax accountant to determine exactly what items attract GST and what percentage of GST is payable.
The Court requires proof to prove what liabilities are or are likely to be.
Section 90 of the Family Law Act exempts from any duty or charge under state or territory law transfers on other instruments executed for the purposes of or in accordance with a property or spousal maintenance order. This includes financial agreement transfers on other instruments. A transfer pursuant to a family law act order or financial agreement is also exempt from stamp duty regardless of the parties to the transfer although the transfer should be identified in the order or agreement in the case of an agreement a separation declaration is also required.
In Western Australia, section 131 of the duties Act 2008, a nominal duty of $20 is payable on a transfer of property of the parties under the family law act or the family court Act Orders or under a Financial or Splitting agreement under the Family Law Act act if the transfer is to a party, a child or trustee of child relationship has ended and they transfer is to a party a child or child’s trustee. proof of the order or agreement is required. It is always a good idea to check with your settlement agent whether a transfer under a family court act order or agreement would be accepted or whether a separation agreement should be prepared for the transfer to be effective.
Can I get 50 % of our assets?
There is no presumption at law that property is to be divided equally or in any other way. How much a party gets is dependent on the circumstances of each individual case according to the principles of law under the Family Law Act or Family Court Act 1997 for De Facto couples in Perth Western Australia. Claims for property settlement and maintenance orders may be issued if either party is either present or ordinarily resident in Australia or is an Australian citizen when the application is filed. It does not matter if parties were married in another country so long as they fulfil this requirement, they may be entitled to property settlement and can issue proceedings in the family court.
What about De Facto partner’s claim to property?
A De Facto claim requires a two year relationship or a child or substantial contributions in relation to a De Facto relationship (and serious injustice if the order is sought is not made) or a registered relationship and that either party was ordinarily resident in Australia when the application was made and that (unless both parties were ordinarily resident there for a third of the relationship or substantial contributions have been made there) both parties were ordinarily resident there when the relationship broke down.
The Family Court can decline to exercise its powers where proceedings are pending in another country.
Delays and Time limits for commencing Applications for property claims
The deadline for a property or spousal maintenance claim application is 12 months after a divorce order has taken effect 2 years after the end of a De Facto relationship or 12 months after a binding financial agreement is set aside or except by leave or consent of another party. This timeline limit does not apply to Applications to set aside a property order or to vary, revive, suspend or discharge a maintenance order. The Court will not grant leave or permission for a party to file an application unless it is satisfied:
Leave for maintenance applications out of time
Each case is assessed on it’s own merit. However, the Family Court may grant leave to proceed out of time for maintenance if a party is likely on face value suffer hardship if the application was denied. The Court considers the reasons for the delay. The deadline for a property or spousal maintenance Holder is 12 months after a divorce order has taken effect or two years after the end of a De Facto relationship or 12 months after a Binding Financial Agreement is set aside except by leave or consent of the parties. Hardship is more than the loss of a right to commence proceedings , a party must have a prima facie claim worth pursuing. The Court also considers whether prejudice to the other party will occur in addition to the merits of the applicant’s claim.
The time limit does not apply to applications to set aside a property order or to vary or to revive suspend or discharge a maintenance order under section 83 of the Family Court Act. The Court shall not grant leave unless it is satisfied:
If the Court is satisfied as to hardship, then the court is required to consider whether in the exercise of its discretion the code should grant or refuse live to Institute proceedings.
An application for leave to proceed out of time cannot be continued after the death of the other party.
Adjournment of property settlement
The Court may if requested by either party adjourn proceedings if it is of the opinion that there is likely to be a significant change in the financial circumstances of the parties or either of them and that having regard to that change is likely to occur it is reasonable to adjourn the matter and an order made at that time is more likely to do justice than an order made immediately.
In forming an opinion as to the likelihood of a significant change in financial circumstances ahead, the court may have regard to any such change that may occur under a superannuation scheme or discretionary trust where its trustee distributes trust property to a party or by other means.
Interim property Orders
Interim orders in respect to property may be made before any adjournment where are appropriate if the Court is satisfied that the remaining property will be adequate to meet the legitimate expectations of both parties at the final hearing, or that the Order which is contemplated is capable of being reversed or adjusted if it is subsequently considered necessary to do so in a given circumstance.
Partial property settlement
In certain situations involving a party to a marriage, if a party is going through properly settlement, a party can negotiate for a partial property settlement for an advance of money to each party towards legal costs, valuation fees and other expenses such as purchasing a home for example. This happens in circumstances where one party has no ready access to funds or realisable assets. Such funds can be characterised as partial property settlement and may be added back to the asset pool although they will be debited to each party’s entitlement when the final property division is calculated. Such payments can be documented as part of the ‘interim orders’.
Declaration About Existence Of De Facto Relationship
Parties to a De Facto relationship may not automatically be entitled to a partial property settlement order if there is a dispute about the existence of a relationship and a dispute in respect to a party’s right to property orders. In WA, a respondent may seek an interim order dismissing the case for want of jurisdiction, however if the court does have jurisdiction it may still award costs. A declaration maybe sought that a De Facto relationship of at least two years existed or did not exist between the parties or that their relationship broke down before or that substantial contributions have been made.
A person is in a De Facto relationship with another person if they are not married or related to each other and having regard to all the circumstances of their relationship they have a relationship as a couple living together on a genuine domestic basis. A De Facto relationship includes same sex partners and can exist if a party is married to someone else or is in another relationship. Those circumstances may include:
Interim Injunctions To Preserve Property
Injunctions in Family Court can be made where a Party has commenced proceedings for Court Orders to prohibit the other party from accessing or dealing with property a certain way, for inspection or seizure of documents without notice to the Respondent or property or to alter their rights liabilities or property rights of a third party.
Injunctions where there is a risk of disposal of assets or their removal from Australia
An order may be mad restraining another party from removing property from Australia or dealing with property in or outside Australia. You have to file an affidavit that includes:
Is there an alternative to applying for an injunction?
Where the risk of disposal relates to an asset that is small in value relative to the value of the asset pool such as a car for example:
When not to apply for an injunction
Seizure of documents or other property
If you can prove your knowledge and existence and location of a vital piece of evidence or valuable item of property and your spouse fails to disclose it or to make it available for evaluation, you can apply to the Court for an order to seize property or documents. This type of Order is known as Anton Piller Order. This type of order entitles you to apply for such an order:
An application for an Anton Piller order must be supported by an affidavit which includes:
Can third parties be bound by court order?
The Court has the power in relation to the property of a party to a marriage to make a property order or grant an injunction in both marital or De Facto claims that is directed to, alters the rights, liabilities of property interests of a third party.
If you require further information of assistance in respect to your property or you suspect the other party may be hiding property to defeat your claim to that property, call one of our Family Lawyers at ABMS LAWYERS on (08) 9468 3297 or via email at firstname.lastname@example.org
Setting Aside Or Varying Property Orders
The court may set aside or vary a property order and if considered appropriate make another order in substitution if it is satisfied:
The Family Law Act allows the code to discharge a property order by consent of the parties. The court may also set aside consent Orders made by consent if it is of the view that a party will suffer loss or if one party acted improperly.
Orders may also be set aside by the conduct of the parties to a settlement. For example, when parties reconcile and do not implement the court order.it would be inferred from their conduct that they have consented do they setting aside of the original order.
Enforcement of property orders
The best means to enforce an order is to anticipate the need to enforce by including in the terms of settlement self-executing enforcement remedies. It is also wise to include an order to enable a registrar of the court to sign any document on behalf of a party who refuses to execute documents.
Other options for enforcement of court orders
Effect of death on property proceedings
Where a party dies before property proceedings are completed:
The proceedings need only be found not found and served before dates for these sections to apply.
In the case of a dispute as to who the executor of an estate is the proceedings as suspended until a grant of probate or letters of administration is obtained.
Bankruptcy and family law proceedings
The Family Court has powers to make a property order even though property has vested in the bankruptcy trustee of a party, altering the interest of the trustee in the vested bankruptcy property.
Creditors and other third parties in property proceedings
The Court has the power to make a property order or grant an injunction that is directed to or alters the rights liabilities or property interests of a third party. Any person who is a creditor or third party may apply for leave to intervene in proceedings. A person granted leave to intervene is deemed to be a party to the proceedings with all the rights, duties and liabilities of a party.
The Orders the Court can make against a creditor or third parties are as follows:
The Court can only make other orders if:
Injunctions Binding Third Parties
The Court has powers to grant an injunction which binds a third party in respect to property settlement and similar to the above.
You should disclose all interests and assets regardless of whether the other party is disclosing or not. This is because there is an obligation on you to disclose all matters relevant to your financial position imposed on parties to Financial proceedings to be frank in respect to all their financial matters. The Family Law Rules which govern the way applications for financial settlement are dealt with in Family Court stipulates that parties to financial cases must disclose documents to the other party to the proceedings which is or has been in their possession or under their control which demonstrates their financial circumstances and is relevant to the issues in dispute in the case. The obligation to give full and frank disclosure is ongoing and continues from the time that financial settlement negotiations commence until final orders are made to resolve their financial matters.
The Family Court may make an order going beyond the identified property of their parties upon proof that a party has not made full and frank disclosure of their assets. A party to a property proceeding where there has been non-disclosure may apply to the Court for the matter to proceed to an undefended hearing.
It depends on the circumstances of each individual case and whether there is any evidence given by the creditor about the debt to be called in. Sometimes there are problems when it comes to assessing secured and unsecured liability upon the breakup of the marriage or relationship especially in circumstances where there is no evidence that such an amount was intended to be alone to the party. An example of this includes a case where a deed for money lent by a party’s father was dismissed as entirely self-serving as was a retrospective mortgage.
The Family Court treats gifts and loans differently. If money is given to you as a gift, then there is no expectation that it will be repaid. If money is given as loan, there is an expectation that it will be repaid. In family situations, there is usually no documentation to show that money was given as a loan or a gift which can complicate the situation.
You should not wait to see what will happen. You should act very fast and don’t waste time. The Family Court can make an order on an urgent basis to prevent a party from selling or disposing of assets if there is evidence that there is a real risk that the sale or disposal being undertaken to defeat the other party’s potential claim for a financial settlement. This type of order is known as injunction or restraint. In certain situations, when an asset has been disposed of or has been sold, the court may still make an order to prevent the proceeds of sale from being spent or dissipated pending a final settlement or final court orders being made. The Family Court can order that assets including the proceeds of sale of the property whether real or otherwise be preserved and not be dealt with or disbursed without the consent of the other party or until the Court makes an order as to the way the item is to be disbursed off if required.
Applications for Perth property settlement and spousal maintenance are heard together but the court will rule on the entitlement to a property order first because after the property settlement they may not be no need for maintenance as well. In certain instances there is need for a distinction between a maintenance component and an order for lump sum maintenance because a maintenance component it’s part of an overall settlement order and as such is final and not capable or variation under a spousal maintenance order.
In some cases parties to a De Facto relationship or marriage may have the right to receive maintenance from the other party. A party to a De Facto relationship or marriage is liable to maintain the other to the extent that they are reasonably able to do so if and only if the other party is unable to support themselves adequately whether it by:
The court may also consider it proper to order that in addition to paying a periodic sum, the payer pay certain expenses on behalf of the payee. The payments may include mortgage repayments associated with the home in which the payee he is living, private health insurance premiums, outgoings on the home or associated with a home in which they pay is leaving or outgoings associated with any such home and other expenses which they pay is unable to meet themselves but which are or can be reasonably incurred.
The amount of spousal maintenance a party is liable to pay or maybe liable to pay to another party is determined based on the consideration of the parties respective financial and personal circumstances at a time of the hearing to determine the issue.
If you are wondering what to bring to your initial appointment with your Lawyer, you are not alone. Below is a list of the information that you should start collating when you plan to have a meeting with your Lawyer:
Dates of significant event
If you require further information of assistance in respect to your property or you suspect the other party may be hiding property to defeat your claim to that property, contact us on (08) 9468 3297, via email, or make an appointment online.
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