Answer:
Property settlement outcomes are determined on a ‘case by case’ basis. An equal division does not always represent an outcome that a Court would order.
In order to assess what outcome might be a just and equitable outcome, the Court follows the following four step process:
1. What is the value of the asset pool?
In this step, it is necessary to identify all items of property and liabilities owned by the parties. This is to determine a ‘dollar value’ for the net asset pool as a whole.
2. What are the parties’ respective contributions to the relationship?
In this step, a Court assesses various contributions including financial contributions (either direct or indirect), non-financial contributions (either direct or indirect) and contributions to the welfare of the family (such as contributions as homemaker or parent).
It is relevant to assess contributions made at each stage of the relationship. This means at the commencement of the relationship, contributions made by each of the parties throughout the relationship, and in some circumstances, post-separation contributions. In ‘weighing up’ those various contributions, one party may receive ‘credit for’ or an ‘adjustment’ in their favour.
3. What are the parties’ respective ‘future needs’?
In this step, a Court assesses what the future is likely to hold for each of the parties. For example, is one party going to be the primary care provider for the children moving forward? What are the parties’ respective income earning capacities, and formal qualifications? Does either party have any health issues, or is there an age disparity relevant to their ability to obtain employment?
By considering each of those factors, along with many others, one party may receive an adjustment in their favour. This is to achieve a just an equitable outcome. By way of an example, if one party has a limited income earning capacity due to their role as primary carer of the children, and the other party earns a significant income, an adjustment may be made to account in favour of the primary care.
4. Do there need to be any further adjustments to provide a ‘just and equitable’ outcome?
In this step, the Court takes into account the more practical considerations. It assesses which party is to retain which assets and/or liabilities within the asset pool.
It also assesses the consequences of implementing a property settlement, and the ‘balance’ between superannuation and non-superannuation assets. In doing so, it may be necessary for there to be a further adjustment in either party’s favour. This is to achieve just and equitable outcome.
It is relevant to note that the above ‘pathway’ is applied to both marriage and de facto relationships (provided that de facto relationships meet the required ‘threshold’).
By following the above pathway, and taking into account the unique facts and circumstances of each individual case, often the outcome is not an equal one. In many cases, an equal division or 50/50 outcome is contraindicated by the unique facts of the case.
While many couples still choose to ‘settle’ for a 50/50 outcome, one party may be agreeing to substantially less than what they otherwise might be entitled to receive if a Judge were determining their case. If the parties agree to an outcome too far outside of the range that a Court might order, having regard to each step in the above pathway, a Court may decline to sanction the deal reached.
It is therefore important to obtain legal advice in respect of property and financial matters, at an early stage, or before committing to a property settlement ‘deal’, as there are only limited circumstances within which a formal property settlement outcome can be varied or set aside after approved by a Court.
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