- Property Settlement & Spousal Maintenance (Financial Matters)
Property Settlement & Spousal Maintenance (Financial Matters)
Couples that are married, Divorced or in a de facto relationship who satisfy the jurisdictional requirements can make an application in the Family Court of Western Australia seeking property settlement and/or spousal maintenance. Please refer to time limits regarding de facto relationships and married/divorced couples.
Contact us directly for a confidential conversation about property settlement financial matters.
The relevant legislation specifies a series of considerations which the Court must consider when making a property settlement Order.
We summarise these considerations as follows:
Property Settlement
Step 1 – Ascertaining the value of existing Assets & Liabilities
The first step is to ascertain the existing assets and liabilities of the relationship (regardless if they were created pre- or post-separation). This may include:
- assets and liabilities held in either party’s sole name;
- assets and liabilities held in joint names;
- assets and liabilities held overseas;
- assets in another party’s possession but still legally owned by a party to the relationship;
- potentially a party’s interests in an entity such as a company and/or trust and/or business.
Some common examples of assets and liabilities are the former matrimonial home and the associated mortgage, motor vehicles, boats & jet skis, campervans, furniture & chattels, shares, cash in bank accounts (including offset accounts), personal loans, credit cards, hire purchase agreements, utilised lines of credit.
For couples that are married or divorced each party’s superannuation entitlements are included in the assets and liabilities pool and orders can be made about the same.
For couples who were previously in a de facto relationship, each party’s superannuation entitlements are not included in the assets and liabilities pool. However, depending on the composition of the asset and liabilities of the relationship, there may be scope to notionally include superannuation in the pool to reach a just and equitable property settlement.
Complex Asset Pools & Single Expert Witnesses
The asset pool of the relationship can:
- be complex;
- involve multiple companies and/or trusts and/or businesses;
- involve one or both parties to the relationship in the control of the aforementioned entities and also third parties (which may or may not be related to the parties to the relationship);
- intertwine their personal financial matters with the entities in which they control;
- include entities of the parties which is the primary source of both parties’ incomes;
- involve specialist knowledge of the business;
- be of high net worth; and
- create complex tax ramifications upon property settlement that should be taken into account in the property settlement and considered before reaching an agreement.
The above issues are not a barrier to progressing your matter. Rather, it may be necessary to appoint a Single Expert Witnesses to conduct a:
- licenced valuation of residential and/or commercial property; and/or
- business valuation; and/or
- valuation of a trust/s and/or company/ies.
It may be necessary to work with an independent accountant, financial planner, mortgage broker, corporate and commercial lawyer, property lawyer and other experts. It may be appropriate to obtain an opinion from Counsel on a contentious issue of law or to represent you at Court Hearings or during a Mediation Style Conference.
Financial Resource
The Court must also consider the financial resources of the parties. A financial resource is a financial benefit which a party to the relationship can reasonably expect will be available to them in the future. An example of a financial resource may be an interest in a deceased estate that is yet to be realised, an expectation to receive money from a claim such as an insurance or compensation payout, a beneficiary of a discretionary trust, ability of a party to borrow funds at a heavily reduced interest rate, and/or potentially long service leave entitlements.
A financial resource is usually not specifically quantifiable and certain and therefore it is not included in the asset pool available for division. Rather, the Court will consider a financial resource in the context of the asset pool and may or may not adjust the division of the asset pool in light of the benefit of the financial resource to reach a just and equitable settlement.
Step 2 – Contributions
Once the existing asset and liabilities of the relationship have been ascertained and a value attributed to the same, then consideration must be given to each party’s contributions as follows:
- direct and indirect financial contributions towards the acquisition, conservation and/or improvement of property. For example, the former matrimonial home and/or investment property, shares, cash, art, inheritances and gifts etc;
- direct and indirect non-financial contributions towards the acquisition, conservation and/or improvement of property. For example, a party to the relationship (or a friend and/or relative) physically performing renovations on the former matrimonial home and/or investment property; and
- the contribution made by a party to the welfare of the family and any children of the relationship, including any contributions made in the capacity of homemaker or parent.
The Court will consider and weigh the above contributions noting that no one specific contribution is legislatively more important than another.
When assessing contributions (positive and negative), the Court may consider the following factors:
- the duration of the relationship;
- each party’s initial contributions as at the commencement of cohabitation;
- each party’s contributions during the relationship;
- each party’s contributions post-separation; and
- the impact each party’s contributions have made to the asset pool. For example, did the contribution increase or decrease the asset pool or have no impact at all.
Step 3 – Future Factors
The Court is required to consider the future needs of the parties when determining what is a just and equitable property settlement. Future factors that the Court will consider are:
- the age and state of health of each of the parties; and
- the income, property and financial resources of each of the parties and the physical and mental capacity of each of them for appropriate gainful employment; and
- whether either party has the care or control of a child of the marriage who has not attained the age of 18 years; and
- commitments of each of the parties that are necessary to enable the party to support:
- himself or herself; and
- a child or another person that the party has a duty to maintain; and
- the responsibilities of either party to support any other person; and
- the eligibility of either party for a pension, allowance or benefit under any law of the Commonwealth; and
- the need to protect a party who wishes to continue that party’s role as a parent; and
- if either party is cohabiting with another person, the financial circumstances relating to the cohabitation; and
- any child support under the Child Support (Assessment) Act 1989 that a party to the marriage/de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the relationship; and
- the effect of any proposed order upon the earning capacity of either party to the marriage; and
- any fact or circumstance which, in the opinion of the Court, the justice of the case requires to be taken into account.
Step 4 – Just & Equitable
The Court must consider if it is just and equitable to make an Order for property settlement and if so, ensure such settlement is just and equitable to both parties.
Settlement Options & Pre-action Procedures
It is far preferable to reach an agreement regarding property settlement without commencing Family Court proceedings. Often the first step is providing your former spouse with your disclosure documents.
Full and Frank Disclosure
Each party has an obligation to provide the other party with documents that are relevant to the dispute at the commencement of negotiations. Some common examples of disclosure documents provided to the other party include but are not limited to:
- a party’s three most recent tax returns and notice of assessments;
- evidence of a party’s superannuation entitlements (by providing a superannuation statement and current online superannuation kiosk screenshot);
- a copy of each party’s bank statements for all accounts in which they have an interest including bank accounts with a positive and negative balance, credit cards, personal loans, lines of credit and so on;
- for a corporation, trust or partnership where the party has a duty of disclosure, the financial statements for the last three financial years including balance sheets, profit and loss statements, depreciation schedules and taxation returns and business activity statements for the previous 12 months;
- a copy of the corporate constitution, trust deed and/or partnership agreement (where relevant); and
- an appraisal of any item of property in which a party has an interest and the value is not agreed with the other party. For example, motor vehicles, boats, jet skis, art, furniture and chattels etc.
Each party should provide full and frank disclosure to the other party to:
- facilitate the identification and valuation of the asset pool and each party’s contributions to the same (including contributions at the commencement of cohabitation, during and post-separation);
- promote transparency;
- facilitate negotiations;
- increase each party’s capacity to make an informed agreement by consent; and
- decrease the chances of a party seeking to set aside a Court Order based on a material failure to disclose.
Full and frank disclosure in an ongoing obligation and remains until the conclusion of your matter.
In the event a party refuses to provide full and frank disclosure, you may commence Family Court proceedings and seek an Order for the disclosure and seek leave to issue a subpoena. If granted, a subpoena may be issued to obtain the disclosure that you require directly from the organisation.
Reflecting the Agreement Reached: Form 11 Applicant for Consent Orders
If you can reach an agreement regarding property settlement and/or spousal maintenance by consent, you may choose to reflect your agreement in a Form 11 Application for Consent Orders. This agreement is often called a “Form 11” or “Consent Orders”. Consent Orders comprises a Court form and attached Orders Sought. If the Court considers the agreement is just and equitable (and complies with form), the Court will pronounce an Order in the same terms of the Order Sought. If the Court does not consider your proposal is just and equitable or does not comply with form, it is likely your application will be requisitioned by the Court. Usually, this is an invitation by the Court to the parties to file amended/further documents or provide further evidence to the Court.
If the Court extracts an Order in the terms that you have sought, it has the same effect as a court order made by a judicial officer after a court hearing. The Court order can then be used to facilitate the transfer of property between the parties of the relationship incurring nominal stamp duty. Further, it resolves your dispute without having to go through expensive, stressful and at times, lengthy court proceedings. The Order may also be used to provide Capital Gains Tax rollover relief. Court Orders can be very difficult to set aside.
Options to Resolve the Dispute
Once the parties have provided full and frank disclosure, the parties should attempt to resolve the dispute in good faith and may choose to:
- make a formal written offer of settlement; and
- engage in verbal negotiations; and
- engage in an informal conference, Mediation, Mediation Style Conference, Arbitration (financial issues only), Dispute Resolution Conferences. In child-related proceedings, unless there are special circumstances the parties must attend Mediation and obtain a Section 60I Certificate before commencing an action in the Family Court of Western Australia;
- Enter into Consent Orders.
By trying to resolve the dispute using the aforementioned strategies you will be satisfying your pre-action procedures before commencing Family Court proceedings. Further, if you have not resolved the dispute you may have at least narrowed the issues in dispute.
If you are unable to reach an agreement by consent, you may choose to commence proceedings in the Family Court. If you have proceedings on foot in the Family Court and have received a judgement that is not favourable to you, we can provide you with advice about appealing the decision.
Spousal Maintenance
A party to a marriage or de facto relationship is liable to maintain the other party, to the extent that the first-mentioned party is reasonably able to do so, if, and only if, that other party is unable to support herself or himself adequately whether:
- by reason of having the care and control of a child of the marriage or de facto relationship who has not attained the age of 18 years;
- by reason of age or physical or mental incapacity for appropriate gainful employment; or
- for any other adequate reason.
The Court may also consider:
- the terms of any property settlement order;
- the commitments of each of the parties that are necessary to enable the party to support:
- himself or herself; and
- a child or another person that the party has a duty to maintain; and
- the responsibilities of either party to support any other person; and
- the need to protect a party who wishes to continue that party’s role as a parent; and
- if either party is cohabiting with another person, the financial circumstances relating to the cohabitation; and
- any child support under the Child Support (Assessment) Act 1989 that a party to the marriage/de facto relationship has provided, is to provide, or might be liable to provide in the future, for a child of the relationship; and
- where the parties have separated or divorced, a standard of living that in all the circumstances is reasonable; and
- the eligibility of either partner for a non-means-tested pension, allowance or benefit; and
- the extent to which the payment of maintenance to the party whose maintenance is under consideration would increase the earning capacity of that party by enabling that party to undertake a course of education or training or to establish himself or herself in a business or otherwise to obtain an adequate income.
The Family Court will disregard any entitlement of the party whose maintenance is under consideration to an income-tested pension, allowance or benefit.
What Does This Mean?
One party may have to financially support the other party even though the relationship has irretrievably broken down (including if the parties have divorced).
Where one party to the relationship has a need (which is often demonstrated in a shortfall between their expenses and their income) they can seek that their former spouse meets that need if they have the capacity to do so (which is often demonstrated by a surplus after the payment of their expenses).
To quantify the need, each party are required to specify their weekly income and expenses (on average) and itemise their assets, liabilities and financial resources. You may choose to review your bank statements and credit card statements as a practical way to ascertain and quantify your weekly spending.
What are the types of Spousal Maintenance?
- urgent Spousal Maintenance (often paid on an urgent and short-term basis pending an interim hearing of the matter);
- interim Spousal Maintenance (often paid on a short-term basis pending final resolution of the matter); and
- final Spousal Maintenance (often paid for a set period or on a fixed basis on final resolution or adjudication of your matter).
How is Spousal Maintenance Paid?
Spousal Maintenance can be paid in a variety of ways such as:
- fixed sum weekly cash payment (by way of bank transfer) for a defined period;
- payment of expenses for a defined period. For example, the liable party pays the recipients private health insurance, prescribed medications, mobile phone bills, rent and so on;
- lump sum. For example, a one-off cash payment (by way of bank transfer or cheque).
Termination of Spousal Maintenance
A party’s obligation to pay spousal maintenance can be terminated on the following basis:
- the recipient of maintenance remarries or enters into a de facto relationship (unless the Court makes an Order that the payments should continue because of special circumstances); or
- If either party dies (unless a lifetime maintenance order has been made); or
- there is a change of circumstances which gives rise to varying, cancelling or setting aside the Order for spousal maintenance.
Other
Often, spousal maintenance is paid as follows:
- paid for a limited and fixed period;
- weekly cash payments to assist a party to retrain/study to prepare for re-entry into the workforce;
- weekly cash payments to assist a party when a party has the primary care of a young child or a child with additional needs which prevents or restricts their capacity to earn an income; and/or
- when a person is unemployable.
Time Limits:
- For married couples, either party can make an application to the Court within 12 months of the Divorce Order becoming final; and
- For de facto couples, either party can make an application to the Court within 24 months of the date of separation.
Should I Pay when there is no Court Order in Force?
This depends on each party’s circumstances.
If possible, we suggest you obtain family law legal advice before making spousal maintenance payments. In some circumstances, if you have been paying spousal maintenance it provides the recipient with evidence of your capacity to pay and therefore strengthens their chances of obtaining a Court Order for you to pay spousal maintenance. However, depending on the circumstances, if you withhold financial support you may be subject to allegations of family violence by exerting financial control over your former spouse.