Ins and Outs of Property Settlements Part 2

When it comes to property settlement matters the court’s primary consideration is to achieve a result that will be just and equitable in all the circumstances. This often involves making alterations to each of the parties’ property rights.

So how does the court decide what is Just and Equitable?

Step 1- Identifying and valuing the net asset pool of the relationship

To determine the net asset pool available for distribution the court uses a simple equation:

  Value of net assets – Value of net liabilities = net asset pool available for distribution

This means that the total value of all of the parties’ assets such as property, motor vehicles, shares, companies, bank accounts etc is all combined and from that the court deducts any of the parties combined liabilities such as mortgages, loans, and other debts. The figure arrived at is the figure that will be divided between the parties.

Step 2- Financial and non-financial contributions

This is where contributions come in. Not only will the court take into consideration the assets that each party brought to the relationship but it will also take into consideration the role of each party during the relationship.

For example, whilst one party may have been the primary breadwinner and thus made a significantly higher financial contribution to the relationship, the other party may have made the bigger non-financial contribution by leaving the workforce to raise the children of the relationship.

Step 3- Future Needs

In addition to considering each of the parties’ contributions to the relationship the court will also place great emphasis on the future needs of the parties. In this regard the role that each party played during the relationship will be of great significance. Now sometimes there will not be much of an imbalance; if the parties both worked throughout the relationship and they did not have any children there might not be a need for much of an adjustment. In circumstances where one party has elected to be the stay at home parent and the other party has continued working however, arguably there will always be a need for an adjustment.

Think about it this way: if you left the workforce in order to be a stay at home parent this would often mean that you would be out of the workforce for at least a few years. During this time your career path has stalled, you are no longer on track for that promotion and in fact your qualifications may have stagnated meaning you might need to completely retraining before you can re-enter the workforce. Your partner on the other hand may have maintained the position of breadwinner throughout the duration of the relationship. Having borne the sole responsibility of providing for the family for those extra years in the workforce, they would also have accrued a significant benefit towards their future earning capacity.

An agreement would not be just and equitable if it failed to address the future needs of the parties.

What else will the court take into consideration?

In addition to taking into consideration the future earning capacity of each of the parties, the Family Law Act 1975 prescribes that the court must also take into consideration the age and state of health of the parties, the physical and mental capability of each party to find gainful employment and whether or not either party will be the primary carer of a child of the relationship.

Step 4 – Just and equitable

This is a final assessment by the court of the above three steps.