What Is a Property Settlement?
A property settlement is the legal process of dividing assets, liabilities and superannuation between separated spouses or de facto partners. The process is set out in the Family Law Act and case law developed since 1975.
Contrary to popular belief, there is no automatic 50/50 split in Australian family law. The Court applies a structured, four-step process to determine a division that is "just and equitable" in all the circumstances.
The Four-Step Process
Step 1: Identify and Value the Asset Pool
The first step is to identify everything that forms part of the "property pool." This includes:
- Real property: the family home, investment properties, land.
- Financial assets: bank accounts, shares, managed funds, cryptocurrency.
- Superannuation: all superannuation interests held by both parties.
- Business interests: sole trader businesses, company shares, partnership interests.
- Personal property: vehicles, jewellery, art, furniture.
- Liabilities: mortgages, personal loans, credit card debts, tax liabilities.
All assets and liabilities are valued as at the date of the hearing or agreement, not the date of separation (although how the assets and liabilities have been dealt with since separation will be considered). This means values can change significantly if proceedings are drawn out over a long period of time.
Full and frank disclosure is required by the law, including tax returns, bank and credit card statements, superannuation statements and details of any trusts or corporate entities. Failure to disclose can result in severe penalties, including the Court setting aside a previous order for final property settlement and/or making an order for one party to pay some or all of the other’s legal fees. The Court even has the power to imprison a party for non-disclosure, although this is usually reserved for the most serious cases.
Step 2: Assess Contributions
The Court assesses the contributions each party has made to the acquisition, conservation and improvement of the property pool. Contributions fall into three categories:
- Financial contributions: income, inheritances, gifts, redundancy payments, compensation payouts.
- Non-financial contributions: renovations, property maintenance, managing investments or a family business.
- Homemaker and parenting contributions: caring for children, cooking, cleaning, managing the household.
Contributions are assessed over the entire course of the relationship, from when you started living together to the date of hearing.
The weight that the Court gives to each of the above contributions will be different depending on the facts of your case. In short relationships with no children, the Court usually gives the greatest weight to financial contributions, whereas in long relationships where one party was the breadwinner and the other party the homemaker and parent, those contributions are more likely to be considered to be equal. It is important to remember that it is not an accounting exercise, and the Court will take a holistic approach to the consideration of contributions.
Step 3: Consider Future Needs
The Court then considers a range of factors that may justify an adjustment to the contribution-based division. These include:
- Age and state of health of each party.
- Income, earning capacity and financial resources.
- Care of children under 18.
- Duration of the marriage or de facto relationship.
- Whether one party has made a greater contribution to the other's earning capacity (e.g., supporting them through a degree or professional qualification).
- Any family violence or other relevant conduct.
This step often results in an adjustment in favour of the party who has lower earning capacity because of the role that they played during the relationship, or ongoing primary care responsibility for children.
Step 4: Just and Equitable
Finally, the Court steps back and considers whether the overall outcome is "just and equitable." This is a broad discretionary assessment. If the proposed division would leave one party in a significantly disadvantaged position, the Court may adjust accordingly.
Formalising the Settlement
There are two main ways to formalise a property settlement:
Consent Orders
These are written agreements filed with the Court and approved by a Registrar or Judge. Once made, they have the same legal force as a court order and are enforceable. Consent orders are the most common way of formalising property settlements and do not require a court hearing.
Binding Financial Agreements (BFAs)
Also known as "prenups" or "postnups," BFAs are private contracts between the parties. They do not require Court approval but must comply with strict requirements under the Act and the rules of contract. For example, the Act requires that both parties receive independent legal advice. BFAs can be set aside by the Court in certain circumstances, such as fraud, duress, unconscionability or material non-disclosure. It is important that you engage a family law specialist to draft these documents, and obtain independent legal advice, because the Court does not have the power to set aside an agreement just because it was unfair or because the advice you received was poor.
Superannuation: A Special Category
Superannuation is treated as property under the Family Law Act but is dealt with differently from other assets because it cannot be accessed until preservation age. The Court can make a superannuation splitting order that divides one party's superannuation interest and transfers a portion to the other party's fund.
Superannuation is often the second-largest asset after the family home and should never be overlooked in settlement negotiations.
Time Limits
- Married couples: You have 12 months from the date of the divorce order to apply for a property settlement through the Court.
- De facto couples: You have two years from the date of separation to apply.
After these deadlines, you need the court's leave (permission) to proceed, and leave is not guaranteed. It is also expensive to litigate this issue, on top of legal fees for the property aspect of your case. It is therefore essential to address property settlement promptly, even if the divorce itself has not been finalised.
The Role of Litigation Funding
For many separating individuals the cost of property settlement proceedings is a significant barrier. Litigation funding provides a solution by advancing the costs of legal representation, with repayment deferred until settlement proceeds are received.
This ensures that both parties can access quality legal advice and representation, regardless of their current financial position, levelling the playing field in what is often an inherently unequal situation.
Key Takeaways
- There is no automatic 50/50 split — every case is assessed individually.
- Full financial disclosure is mandatory and non-compliance carries serious consequences.
- Superannuation is property and must be included in negotiations (although you do not have to agree to split it).
- Time limits apply, do not delay.
- If you cannot afford legal representation upfront, explore litigation funding options to ensure you receive proper advice and a fair outcome.