What is a property settlement

Key Definitions

Before diving into the process, it’s important to understand two key concepts:

1. Legal Ownership: This means an item of property—whether cryptocurrency, personal belongings, real estate, or money— that is legally registered in a person’s name or is regarded as theirs under the law.
2. Beneficial Ownership: This refers to a moral or equitable form of ownership. For example, if you buy a house with someone but only their name is on the title, you may still have beneficial ownership even though the legal title isn’t in your name.

How Is a Property Settlement Calculated?

While many sources describe property division as a “four-step process,” there are actually two important preliminary considerations before the traditional steps begin.

1. Does the Relationship Qualify?

The Family Law Act 1975 (Cth) requires that the parties were either married or in a de facto relationship in order to “qualify” for a property settlement under that Act. Typically, a de facto relationship is one lasting at least two years or where the parties share a child (there are other ways a de facto relationship can be established, but these are the most common).

2. Is a Property Division Necessary?

A property settlement involves changing legal ownership of assets. If both parties already own assets solely in their names with no crossover and do not intend to transfer assets or superannuation, a property settlement may not be needed. They might still seek declarations confirming ownership but without dividing property.

3. Identify and Value Assets and Liabilities

This is the first of the traditional “four step” process.  All assets, liabilities, and financial resources must be identified and valued at today’s date, regardless of when acquired—before, during, or after the relationship. This includes:

• Real estate
• Bank accounts
• Vehicles
• Shares and cryptocurrency
• Business interests
• Superannuation
• Debts such as mortgages, loans, and credit cards

4. Assess Contributions

This step looks at what makes up the property pool, and how the assets and liabilities came to be. The result is that the Court (or the parties) can place a percentage division on the contributions to the property pool (eg, that the parties contributed equally, or one party contributed 60% and the other 40%).

The typcial starting point is to look at what the assets of the parties were at the start of the relationship. Did either party bring more to the relationship than the other, or were they fairly equal at the start?

Then, consideration is given to how assets and liablities came to be acquired or sold throughout the relationship. Did the wife’s parents gift property to the parties, or did the husband experience a lotto win? How was the deposit on a house purchase funded, did one party work while the other had more of a homemaker or parenting role?

Finally, consideration is given to the current assets and liabiliites of the parties, to then determine a percentage contribution by each party to the property and liablities owned by them at that stage.

Three important notes when assessing contributions:

1. The role of homemaker and parent is given weight and is often viewed as equal to the income-earning contribution.
2. Assessing contributions is not a “mathematical” exercise, but instead looks at the contributions of the parties from a holistic perspective. While a balance sheet is important to help illustrate what needs to occur in a property settlement, the legal title of properties is not the same (necessarily) as the contributions analysis when looking at the context of the whole relationship.
3. Other issues, such as the impact of family violence, waste of assets by one party, or out of the ordinary care arrangements, can mean that the contributions of one party were more onerous than standard, and should therefore be weighted more heavily when thinking about the division of contributions to the final property pool.

5. Consider Current and Future Circumstances

Once a figure has been reached on contributions, the next step is to consider whether there should be any adjustments made based on the current circumstances of either party, and their future circumstances. Put more simply, this stage looks at the impact of the relationship on either party and their ability to move forward, and the extent to which there are outside forces, such as financial resources, proximity to retirement, care of children or the health of either party, that impacts on their ability to “recover” financially from the sepraation. The Family Law Act 1975 (Cth) sets out an extensive list of relevant factors, but key ones generally include:

• Whether either party has caused intentional or reckless damage or waste of property, such that the parties have less now than what they might have
• Whether either party played a homemaker role to such an extent that it limited their work or career advancement
• The age, health, income disparity, earning capacity of the parties now (as this speaks to their ability to “recover” financially from the relationship and support themselves going forward)
• Care responsibilities for children or other persons
• Whether either party has repartnered (and the extent to which they can expect some support from their new partner)
• Whether either party has access to “financial resources” that they could call upon if they were to suffer hardship.  Think, for example, where there might be a history of the party being able to call upon income from a family trust or other family money.

Adjustments may be made to the contribution percentages to reflect these circumstances.  For example, if the contributions of a party were 65% but the other party is entitled to a 10% adjustment based on circumstances, then the overall property division would then be 55:45.

6. Ensure the Division Is Just and Equitable

The court ensures the division is fair overall, considering both percentages and the composition of the division. For example, awarding one party all the superannuation and the other all the cash may be unfair if one party is decades from retirement and needs funds now.

Case Law Examples

• Greyson & Maher [2022]: A medium-length de facto relationship where all assets were separate except the family home, which was purchased by the husband in the wife’s name. The court ordered the home to be divided equally, with other assets remaining separate.
• Holland & Holland [2017]: The husband received an inheritance 3.5 years after separation, which was included in the property division. The court emphasised the need to assess the nature of the property and contributions across the entire relationship, not just at a point in time.
• Gare & Farlow [2023]: The court valued a business based on its “value to owner” rather than just its assets, recognising that a business might be unsaleable but highly valuable to the owner.  In this case, the wife operated a business which drew a large income for her, but which required her to be working in it to have value.  She argued therefore that its value was simply in its assets, while the husband successfully argued for a “value to owner” approach.

Conclusion

Property settlement is a complex, individualised process. There is no automatic division based on, say, length of relationship, or number of children.  The outcomes depend on contributions and circumstances of each individual relationship. While not legally mandatory, formal property settlements are strongly recommended to avoid future claims, as the property pool is assessed at settlement, not separation.

How We Can Help

At Unbundled Family Law, we support you through every stage of your property settlement journey. Whether you need help calculating your entitlement, drafting settlement documents, or preparing court applications, we offer flexible, targeted assistance when it is needed.