In the wake of a relationship breakdown, whether through separation or divorce, the division of property stands as one of the most critical and often contentious issues faced by former partners. Property settlement encompasses everything from the family home to superannuation, investments, and debts, requiring a meticulous evaluation of each party’s financial landscape.
As many former couples grapple with the emotional and financial upheaval of separation or divorce, understanding the intricacies of property settlement is extremely important. However, there are many intricacies and we don’t expect you to know everything. Which is why we’ve put together some information on some of the common and no-as-common questions that people ask our family lawyers about property settlements.
We’re going to cover various matters, such as the importance of timing, and the potential for achieving a settlement without court intervention.
So, whether you’re contemplating the necessity of a lawyer or wondering about the steps following a settlement, this guide seeks to provide clarity and direction, paving the way for a smoother transition into the next chapter of your life.
What is a property settlement?
Ok, let’s start with the basics first. A property settlement refers to the process of dividing property and financial resources between parties following a divorce or separation. The term “property” encompasses a wide range of assets and liabilities, including but not limited to:
- Real estate (houses, land, and investment properties)
- Cash and bank accounts
- Investments (stocks, bonds, and superannuation)
- Businesses and partnerships
- Vehicles and boats
- Furniture and household items
- Debts and loans
The goal of a property settlement is to reach a fair and equitable distribution of the couple’s assets and liabilities, taking into account a variety of factors such as the length of the relationship, contributions made by each party (including financial, non-financial, and as a homemaker or parent), and the future needs of both parties. This process can be achieved through mutual agreement between the parties, through mediation or negotiation facilitated by legal representatives, or, if an agreement cannot be reached, by applying to a court for a decision.
Can a property settlement be changed?
In Australia, a property settlement can be changed under certain circumstances, but it’s important to understand that once a property settlement has been finalised, either through a court order or a binding financial agreement, it is generally intended to be final and legally binding.
However, there are specific instances where changes may be considered:
- Appeal: If you believe the court made an error in the original decision, you have a limited time after the order is made (usually 28 days) to file an appeal. This process involves a higher court reviewing the decision to determine if there was a legal error in the original hearing.
- Setting aside a court order: Under certain conditions, a court may agree to set aside (cancel) a final property settlement order. According to the Family Law Act 1975, this can happen if:
- There has been fraud, duress, suppression of evidence, or any other form of misconduct.
- The circumstances of one or both parties have changed significantly, making the order impractical to implement.
- A party has failed to disclose relevant information, typically about their financial circumstances, which would have led to a different decision had it been known.
- In the case of an order concerning a child, if there has been a change in the circumstances relating to the care, welfare, and development of the child, it’s necessary to revisit the order to safeguard the child’s interests.
- If a person’s failure to comply with the orders has resulted in an inequitable distribution of the property settlement.
- Consent Orders for changes: If both parties agree to change the terms of their property settlement after finalisation, they can submit a new set of consent orders to the court for approval. This requires both parties to mutually agree on the changes and demonstrate that the new agreement is just and equitable.
- Revocation or variation of a Binding Financial Agreement (BFA): If the parties had entered into a BFA (similar to a prenuptial agreement) rather than obtaining a court order, they can agree to change or terminate this agreement. Changes to a BFA must be made in writing, signed by both parties, and follow specific legal protocols to be valid.
Changing a property settlement is complex and typically requires showing significant reasons for the court to consider altering the original order. It’s strongly recommended to seek legal advice if you’re considering attempting to change a finalised property settlement, as legal professionals can provide guidance specific to your situation and the requirements of the law.
Can you divorce before finalising a property settlement or can you finalise your property settlement before you get divorced?
Yes, you can initiate a divorce before finalising a property settlement, and you can also finalise your property settlement before getting divorced in Australia. The processes of divorce and property settlement are separate under Australian family law, but they are often related and can impact each other.
If you choose to wait until your divorce is finalised before even beginning the process of a property settlement, you need to be aware that there are strict time limits of being able to do so. A property settlement must be applied for to the Court within 12 months of the divorce being granted. It doesn’t need to be finalised, however, if you are attempting to resolve your property settlement without court intervention, it’s best to start sooner rather than later just in case you are unable to reach an agreement. If you wait too long and are unable to come to an agreement together and it has been more than 12 months since your divorce was finalised, the court will likely reject your application for a property settlement, unless there are unique circumstances.
Regardless of the timing, it’s crucial to legally formalise your property settlement through one of two ways to ensure it is legally binding:
- Consent Orders: An agreement that is formalised and approved by the court. Even if you haven’t applied for a divorce, you can submit a consent order detailing your property and financial settlement to the court for approval.
- Binding Financial Agreement (BFA): A legal agreement between parties that doesn’t require court approval but must be drafted and signed in accordance with legal requirements, including receiving independent legal advice.
Can you do your own property settlement or do you need a lawyer?
In Australia, it is possible to conduct your own property settlement without engaging a lawyer, but whether this is advisable depends on the complexity of your financial situation, the relationship and trust you have with your former partner, and your ability to negotiate an agreement with your former partner. Doing your own property settlement involves reaching an agreement on the division of your assets, liabilities, and superannuation without formal legal representation.
While it is possible to do your own property settlement, caution should be exercised. The process involves legal documents and agreements that have long-term financial and legal implications. Many people choose at least to consult a lawyer for advice on their rights and obligations, to review the proposed settlement, and to ensure the legal documents are correctly prepared and submitted. This can provide peace of mind and protect both parties from potential future disputes.
You can also seek advice regarding property settlement matters before you’ve even separated. That way, you can have an understanding of what is involved and all areas that need to be considered.
How long does a property settlement take?
The duration of a property settlement in Australia can vary significantly depending on several factors, including the complexity of the asset pool, the level of cooperation between the parties, and whether the settlement is achieved through mutual agreement or requires court intervention. Here’s a general breakdown of how long a property settlement might take under different circumstances:
Mutual Agreement
Negotiation and Mediation: If both parties are cooperative and can reach an agreement through negotiation or mediation, the property settlement process can be relatively quick. This could take a few months to negotiate, draft, and finalise the necessary documents (consent orders or a binding financial agreement).
Legal Formalities: Once an agreement is reached, drafting and signing the agreement or preparing and filing consent orders with the court usually takes additional weeks to a few months, depending on the complexity of the agreement and the efficiency of the legal professionals involved.
Mediation
If you’re unable to come to an agreement there is a step before court intervention, and that is mediation. This is where the people involved in the property settlement dispute have a third-party mediator who essentially facilitates a conversation between the parties. This can make the negotiation process easier as the parties are able to have their time to talk and respond to each other’s queries and concerns.
Mediation can also include lawyers, who may be able to offer advice to their clients or represent their client’s wishes on their behalf.
Court Process
Litigation: If the property settlement requires court intervention, the process can be significantly longer. Going to court involves several steps, including filing applications, attending hearings, and possibly going to trial. This process can take from several months to a few years, depending on the backlog of the court, the complexity of the case, and the availability of all involved parties.
Interim Orders: In some cases, parties may seek interim orders for urgent matters while waiting for the final settlement. This can add to the overall timeline.
Factors Affecting Duration
- Complexity of the Asset Pool: The more assets and liabilities there are to consider, especially if they include complex items like businesses, overseas properties, or intricate financial structures, the longer the process can take.
- Disagreement and Conflict: High levels of disagreement or conflict between parties can significantly delay negotiations and, consequently, the entire settlement process.
- Legal and Court Delays: Workloads and procedural requirements of legal representatives and the court can also impact the timeline.
- Readiness and Availability of Information: How quickly both parties can provide necessary financial documents and information can affect the speed of negotiations and legal processes.
Finalisation and Implementation
After an agreement is reached and formalised, or a court order is made, implementing the terms of the property settlement (such as transferring property titles, dividing superannuation, and splitting financial assets) can also take additional time, ranging from weeks to months.
What happens after a property settlement?
After a property settlement is finalised, either through mutual agreement formalised by consent orders, a binding financial agreement (BFA), or a court order following litigation, several steps are taken to implement the agreement and ensure that all terms are carried out as decided.
Implementation of the Settlement
Here’s what you can expect when a property settlement agreement is finalised:
- Transfer of Property Titles
- Division of Financial Assets
- Superannuation Splitting
- Payment of Debts and Liabilities
- Update of Estate Planning
- Insurance and Beneficiaries
Legal and Administrative Considerations
Compliance: Both parties must comply with the terms of the settlement or court orders. Failure to comply can lead to legal consequences, including the possibility of court action to enforce the agreement or orders.
Tax Implications: There may be tax implications resulting from the property settlement, such as capital gains tax (CGT) on the transfer of property or adjustments to tax reporting and liability. It’s advisable to seek tax advice to understand and plan for any tax obligations.
Emotional and Practical Adjustments
Beyond the legal and financial aspects, parties may go through a period of adjustment as they adapt to their new financial circumstances and living arrangements.
Finalising the property settlement often provides a sense of closure, allowing both parties to move forward from the relationship breakdown with a clear understanding of their financial rights and obligations.
Future Considerations
Once a property settlement is finalised and implemented, it is generally considered final. Parties are typically barred from making further property claims against each other in relation to the relationship.
In rare and exceptional circumstances, if there are significant changes, there may be grounds to revisit the settlement, but this is difficult and requires legal advice.
Finalising a property settlement is a significant step in moving on after a separation or divorce. It requires careful attention to both the legal and practical steps involved in implementing the agreement or court orders, and parties often benefit from professional advice to navigate this process smoothly.
How is property settlement worked out or decided?
When a property settlement cannot be agreed upon by the parties involved, Australian courts follow a structured process to determine how assets, liabilities, and financial resources should be divided between parties following a separation or divorce.
This process is guided by the Family Law Act 1975 (Cth) and involves several key steps designed to ensure a fair and equitable distribution based on the unique circumstances of the relationship. Here’s an overview of how the courts decide on property settlements:
- Identifying and Valuing the Asset Pool
- Asset and Liability Identification: The first step is to identify all the assets, liabilities, and financial resources of both parties. This includes everything owned individually or jointly, such as real estate, vehicles, savings, superannuation, businesses, debts, and any other financial resources.
- Valuation: The court will then determine the current value of these assets and liabilities. This may require professional valuations, especially for property, businesses, or complex investments.
- Assessing Contributions
- Types of Contributions: The court assesses the contributions made by each party towards the acquisition, conservation, or improvement of the asset pool. Contributions can be financial (such as income or payments towards assets), non-financial (such as renovations to a home), and homemaker or parental contributions.
- Evaluation of Contributions: The court evaluates the extent and nature of the financial and non financial contributions to decide how they impact the division of assets.
- Considering Future Needs
- Factors Affecting Future Needs: The court considers the future needs of each party, taking into account factors such as age, health, financial resources, care of children, and the ability to earn income.
- Adjustments for Future Needs: Based on these considerations, the court may adjust the division of assets to ensure both parties can meet their reasonable future needs.
- Making a Just and Equitable Distribution
- Overall Fairness: After considering the asset pool, contributions, and future needs, the court aims to make a decision that is just and equitable for both parties. This doesn’t always mean an equal split but rather what is fair considering the entire circumstances.
- Practical Implementation: The court also considers how its orders can be practically implemented, including the ability to transfer assets and the impact of taxes or duties.
- Issuing Orders
- Final Orders: Once the court has made its decisions, it issues orders that legally bind the parties to divide the assets, liabilities, and financial resources as determined. These orders can include the transfer of property, payment of lump sums, splitting of superannuation, and any other necessary financial adjustments.
Key Principles Guiding the Court’s Decision
- Discretion: The courts have wide discretion in family law matters, allowing them to tailor orders to the specific circumstances of each case.
- No Formula: There is no set formula for dividing assets; decisions are based on the evidence presented and the legal principles outlined in the Family Law Act.
- Holistic Approach: The courts take a holistic view of the relationship, considering both financial and non-financial contributions, as well as the welfare of any children involved.
The process is designed to achieve a fair outcome that acknowledges the contributions made by each party during the relationship and ensures that both parties’ future needs are considered. Given the complexity and the significant discretion afforded to the courts, outcomes can vary widely depending on the specifics of each case, which is why legal advice is often recommended when navigating property settlements through the court system.
Are there time limits for a property settlement?
Yes, in Australia, there are specific time limits for applying for a property settlement after a divorce or separation, governed by the Family Law Act 1975. These time limits are in place to ensure that property matters are resolved within a reasonable period following the end of a relationship, providing certainty for both parties moving forward.
For married couples, you have up to 12 months after the date the divorce has been granted to apply for a property settlement, while those who were in a de facto relationship have 24 months to apply for a property settlement. While a married couple’s time frame may appear shorter on a superficial level, it’s important to note that a couple who are married are unable to apply for a divorce until they have been separated for at least 12 months. While they wait out the separation period, they can be working on a property settlement agreement.
Why Time Limits Matter
Time limits help provide certainty and allow individuals to move on with their lives, knowing their financial ties have been settled. They also encourage parties to resolve their financial matters in a timely manner following the end of their relationship.
Seeking Legal Advice
Given the strict time limits and the potential complexity of applying for leave out of time, it’s advisable for individuals to seek legal advice regarding their property settlement to ensure they understand their rights, obligations, and the time frames applicable to their situation. Legal professionals can provide guidance on the process, help negotiate settlements, and assist with court applications if necessary.
Stepping Forward with Confidence and Clarity
Navigating the complexities of property settlement in the aftermath of a separation or divorce is undoubtedly challenging. The path is fraught with legal intricacies, emotional hurdles, and the necessity for timely, judicious decision-making.
As we’ve explored, the importance of adhering to specified time limits cannot be overstated, nor can the potential for navigating this process without direct court intervention through agreements or mediation. Yet, the guidance of seasoned professionals can be the linchpin in transforming a daunting legal obligation into an opportunity for closure and new beginnings. This is where Clarity Lawyers steps in. Specialising in family law, Clarity Lawyers brings expertise, empathy, and a tailored approach to each case, ensuring that clients not only understand their rights and obligations but are also empowered to make informed decisions about their future.
In a landscape that demands both legal acumen and a deep understanding of the personal dimensions of separation and divorce, Clarity Lawyers stands out. Our commitment to providing clear, comprehensive legal advice and support throughout the property settlement process reflects a dedication to achieving outcomes that align with clients’ needs and aspirations. For those embarking on the challenging journey of property settlement, partnering with Clarity Lawyers means not just navigating legal complexities with ease but moving forward with confidence and clarity towards a brighter future.
We’re based in Newcastle and Maitland in New South Wales, however, our family law services are available Australia-wide. Call us on (02) 4058 4007 or book a free, no obligation consultation here.
