The decision

Discretion to make orders

When hearing an application for property orders, the court must first decide whether it is just and equitable to make orders. The court can't make orders unless it is satisfied, in all the circumstances, that it is just and equitable to do so. It doesn't have to make orders simply because a person has applied for them. What is just and equitable will depend on the circumstances of each case.

It is not just and equitable for the court to make orders simply because you and your ex-partner have separated.

If the court decides it is just and equitable to make orders, it has the discretion to make such orders as it considers appropriate in the circumstances. This is a broad power to make a wide range of orders, including orders:

• to transfer ownership of property to another person
• to sell the family home
• dividing personal property
• splitting superannuation
• for one person to pay the other person a sum of money.

Power to make orders

The court has the power to make orders regarding any property of the parties to a marriage or de facto relationship, regardless of how or when the property was acquired. No property or debts are excluded from consideration by the court. However, the property must currently exist. The court can’t make orders about property that doesn’t exist, or the existence of which is uncertain. The court can’t make orders to create property.

Before it can make any orders, the court must first determine what the property of the parties is. It must also assess the contributions and future needs of the parties. It does this in percentages. The court will decide how to divide the property pool in accordance with its assessment. It may need to consider whether an asset is going to be sold or transferred, or whether to split superannuation.

Property of the parties

Before it can make any orders, the court must first determine what the property of the parties is.

Generally, this is the property that the parties own, either together or individually, at the date of the final hearing. This includes personal property and property owned by a business that the parties have an interest in. It also includes property that was purchased after separation.

Ownership is determined by a party’s legal rights and interest in property, rather than moral claims.

All property must be considered by the court when making orders, regardless of when it was acquired. That is not to say that the court will divide all property of the parties. The court can isolate some property from the rest of the property, which will be divided. But it can only do this after it has considered the contributions and the future needs of the parties.

Overseas property

The court can take into account and make orders about overseas property, including orders for parties to transfer or sell overseas property. However, these orders may be difficult to enforce in a foreign country.

If a foreign court has already made orders about overseas property, an Australian court likely won’t hear an application for property orders regarding that property.

Keepsakes

While some items may have little to no monetary value, they may hold value for the parties, for example photos, souvenirs from holidays, and other keepsakes. Even though these items have no monetary value, the court can still make orders to divide them. The court can also make orders for one party to provide copies to the other party, for example, photos.

Add backs

In some circumstances, the court can add assets back into the property pool if they have been disposed of. This often occurs where:

• money has been spent on legal fees
• assets have been distributed prematurely – that is, before a final property settlement
• where a party has wasted, reduced or minimise the value of an asset or the property pool, for example, through gambling large sums of money

When deciding whether to add an asset back into the property pool, the court will consider whether it was reasonable for the party to dispose of it. The court won’t add back money that was used to pay a party’s reasonable living expenses, such as rent and utilities. You are allowed to use your income and savings to support yourself. You don’t have to stop spending all money after you separate and before you finalise your property settlement. 

Debt

The court can take into account secured and unsecured debts when making property orders.

A secured debt is tied to specific property like a house or car. The property acts a security for the loan. If you don’t meet the repayments, the creditor can repossess the property you put up for security to recover the debt. Some examples include:

• a mortgage
• a car loan
• rent to buy.

An unsecured debt is not tied to specific property. If you don’t meet the repayment, your lender must take legal action to recover the debt. Some examples include:

• credit cards
• unsecured personal loans, including buy now pay later loans
• utilities – electricity, gas, phone and internet
• student loans
• tax debts.

The court can make orders that one party is solely responsible for repaying a debt. This may occur where:

• one party has a tax debt from the income they earned after separation, and that income wasn’t used for the benefit of the other party or a child of the relationship
• one party fails to pay tax but lies and tells the other party that they have.

The court can also disregard a debt, partly or entirely, if it:

• is too vague or uncertain
• is unlikely to be enforced
• was incurred unreasonably
• is only connected to one of the parties and it has no connection to the other party.

This often occurs with debts that are allegedly owed to relatives. For example, a loan from a parent of a party that is unlikely to be enforced.

In these cases, the court will be looking to see whether:

• the debt can’t be enforced anymore because it is statute barred
• no repayments have been made and there is no evidence that the lender will take action to recover the debt.

A debt is statute barred if the lender is out of time to take legal action to recover the debt. This means the borrower may not have to pay the debt. The time limits for a lender to take action against a borrower differ depending on whether the debt was secured or unsecured.

For more information, see the fact sheet Recovery of Old Debts on the Financial Rights Legal Centre website.

In these circumstances, the court may divide the property pool without deducting the debt owing to the family member or friend. Where the court chooses to disregard a debt, it may be taken into account as a financial contribution made by the party that received the money.

Valuing property and debts

Property

Once all of the property of the parties has been identified, it must then be valued. Most property is valued at a fair market rate from around the date of the final hearing. Jewellery, cars, and furniture is valued at its fair market value, not the insured value or purchase price.

Usually, the court will determine the value of property that is used as security for a debt by deducting the total debt owing from the fair market value of the property. For example, determining the value of the family home by deducting the amount owing on the mortgage from the fair market value, to get the equity in the property. However, this is not a set rule.

The court can also consider any realisation costs and tax liabilities, such as capital gains tax. It may do this where it is likely that an asset will be sold, such as an investment property.

If you and your ex-partner agree on a value, the court will use this figure. The court can also rely on a party’s estimate of the value of property if the other party doesn’t object.

If there is a dispute about the value of an asset, the court can make an order for a formal valuation to be completed. If a business needs to be valued, an accountant must be involved to help determine what valuation method to use.

If the court can’t determine the value of an asset, it can make orders for it to be sold so that it’s true value can be revealed by the market.

If an item has such a low value that it is insignificant compared to the value of the other property and overall property pool, the court may ignore it and focus on the more major issues. In these circumstances, the court expects parties to reach an agreement about:

• how to divide these assets, or
• the values of these items.

Debt

Usually, the value of a debt is the total amount owing at the time of the final hearing.

In some cases, the court can use its discretion to value a debt at a lesser amount than what is currently owed. It may do this in circumstances where the loan is for a fixed term and has been made on favourable terms to the borrower. This includes situations where a person is loaned money by a friend or family member.

In some situations, it can be difficult to value a debt. Even if the value of some debts can’t be accurately determined, the court can still take them into consideration when making property orders, for example, tax debts.

Superannuation

If a superannuation benefit can be split, it may be treated like property by the court. If it can’t be split, it may be considered a financial resource, for example, an overseas pension.

Before the court can make an order splitting superannuation, it must value a superannuation benefit. Usually, this information can be obtained from the Trustee of the superannuation fund by filling out a Form 6. However, in some circumstances you may need to obtain an expert valuation.

Contributions

The court will consider the contributions you and your ex-partner made to the acquisition, maintenance and improvement of any property. There are three different types of contributions it will look at:

• direct or indirect financial contributions
• direct or indirect non-financial contributions
• contributions towards the welfare of you and your ex-partner, and your children – this includes homemakers duties and care of your children.

The contributions you have made doesn’t have to be to property that you or your ex-partner currently own. It can include property that has been sold or disposed of.

The court will determine the weight of your contributions relative to your ex-partners contributions. This is usually expressed as a percentage range, for example 60 to 65 percent.

If the contributions of you and your ex-partner are different, the court will determine what adjustments should be made. This may occur in situations where:

• a party made substantial initial contributions – this will carry more weight in short relationships than long relationships
• a significant contribution during the relationship, such as an inheritance or gift from parents
• where one party has wasted the property, for example, by gambling large sums of money
• post separation contributions.

In short relationships, of five years or less, the court may give more weight to contributions, especially initial financial contributions.

There is no presumption that the property pool should be divided equally between you and your ex-partner.

Future needs

The court will also determine whether there are any factors that relate to you or your ex-partners future financial circumstances that it must consider. There are several factors the court must consider, including:

• the age and health of you and your ex-partner
• the income, property, financial resources, physical and mental capacity to work of both you and your ex-partner
• if you and your ex-partner have a child together, the care you or your ex-partner provide for your child
• the commitments that are necessary for you and your ex-partner to support yourselves, your child, and any other person you have a duty to maintain
• whether you or your ex-partner have the responsibility to support another person
• whether you or your ex-partner are eligible for a pension, Centrelink benefit or superannuation payment
• a standard of living that in all circumstances is reasonable
• the effect of an order on the ability of a creditor to recover a debt that you or your ex-partner owe
• the need to protect a party who wishes to continue their role as a parent
• whether you or your ex-partner have moved in with a new partner
• any fact or circumstance.

While the court must take these factors into account, not all will be relevant to your case. Where a factor is irrelevant, the court can ignore it. This is not a complete list of all the factors that the court may have to consider.

The court has the discretion to decide how much weight should be given to any relevant factors.

The court must also consider:

• the effect of any order on you or your ex-partners earning capacity
• any child support you or your ex-partner pay, or might be liable to pay, for your child.

The court must consider the economic consequences of the orders it makes, to ensure they are just and equitable.

While the court must consider the effect on an order on earning capacity, it is not prohibited from making an order that have an effect. It is most common for the court to consider the factor where:

• one party has a business
• the parties have a farm.

When deciding what weight to give to the payment of child support, the court will consider:

• the amount that is being paid
• whether child support has been paid in the past
• the likelihood that child support will be paid in the future
• the ages of your child and the length of time that child support may be paid in the future
• the impact of the child support payments on both parties overall financial position.

If you and your ex-partner have different future needs, the court may decide whether any adjustments should be made to account for this difference. It may do this where:

• one party has a greater earning capacity
• one party will continue to be primarily responsible for the care of your child
• one party has significant health issues.

Depending on your circumstances, the court may make an adjustment to account for a difference in contributions and future needs, or just contributions or future needs.

Superannuation

Whether you and your ex-partner have superannuation is relevant to your current and future financial circumstances. It affects your current and future living standards and will be considered by the court when deciding what is a reasonable standard of living in the circumstances.

The court will consider what superannuation you and your ex-partner currently have when it determines what property you have. It will also look at the ability of you and your ex-partner to accumulate superannuation in the future when it considers the physical and mental capacity of you and your ex-partner to work.

Global versus asset by asset approach

There are two approaches the court can take when determining the entitlements of the parties:

• a global approach – where each party’s contributions are assessed in relation to the whole property pool
• an asset by asset approach – where each party’s contributions are assessed in relation to individual items of property.

Usually, the court will take a global approach.

The circumstances when the court will take an asset by asset approach may include:

• short relationships
• where parties have kept their property separate and their contributions have been towards their own property
• where one party has made significant contributions to an asset purchased after separation.

Failure to disclose property

If a party has failed to disclose property, the court can take this into account when deciding what orders to make.

If the court finds that a party has failed to disclose income or an asset, the Court may adjust the property settlement in favour of the other party, if they have provided full disclosure. This means that the other party will receive a greater share of the property pool.

There must be enough evidence that the court can rely on to make a finding of non-disclosure and an adjustment to the property settlement.