How Does the Division of Assets Work After Separation or Divorce?

Published November 12, 2024

by Walid Joseph Kalouche

Dividing assets after a separation or divorce (also called property settlement) can be a stressful and confusing process, as it is often difficult to determine what each person is entitled to. Disagreements are common. The Family Court follows a structured approach, using a four-step process to determine the division of assets. This includes:

Identification of the asset pool
Assessment of each party’s contributions
Adjustment for future needs
Ensuring the division is just and equitable

We follow the Court’s framework to provide strategic legal advice on asset division, helping you navigate this challenging time. Here is each step in more detail.

1. Identifying the Pool of Assets

The first step is to identify the total asset pool. The asset pool is made up of all the assets of the parties less their liabilities. This includes all property, investments, shares, businesses, vehicles, cash, jewellery, and other valuables owned by either party, either jointly or individually. Some clients are concerned that their partner has the asset in their name and theirs does not appear. Under the Family Law Act, it doesn’t matter whose name the assets are in. Assets held by either party, even through companies or trusts, form part of the pool that will eventually be divided.

After identifying the assets, the next step is to work out the liabilities. This includes any debts or financial obligations, like loans or credit cards and these will be deducted from the total asset value to determine the net pool available for division. Superannuation is another type of property but is dealt with in the same way as any other asset, so for all intents and purposes it is included in the pool for division and distribution.

2. Assessing the Contributions of Each Party

Next, the Court assesses the contributions made by both parties throughout the relationship, which include:

Direct financial contributions: These typically include income, savings, bonuses, and investment returns.
Indirect financial contributions: Gifts or inheritances received by either party are examples.
Negative financial contributions: These reflect financial losses due to reckless or deliberate actions, such as gambling or substance abuse, which diminish the asset pool.
Non-financial contributions: These include domestic duties, child-rearing, and any contributions that have increased the value of assets, such as property renovations.

Both financial and non-financial contributions are often considered equal by the Court. For instance, if one party worked full-time while the other cared for the children, the Court may regard these contributions as balanced. For long-term relationships (typically over 10 years), assets owned prior to the relationship become less relevant. However, in shorter relationships, assets one party brought into the marriage, like pre-owned property or significant savings, will be considered in the division. While this step looks at past contributions, the next step involves adjusting for future needs.

3. Adjusting for Future Needs

The third step considers the future needs of each party. This can significantly impact how assets are divided, as it assesses each party’s capacity to meet ongoing responsibilities and special needs. Key factors include:

Earning capacity: Can both parties continue to generate income? If one party sacrificed career opportunities to support the other or care for children, this will be considered.
Age and health: Older individuals or those with health issues may have more financial needs.
Children’s needs: The primary carer of children, and the number and ages of the children, will be factored into the division.
Other responsibilities: This includes ongoing care for dependants, such as elderly parents.

If one party’s ability to earn income has been weakened due to career sacrifices during the relationship, they may be entitled to a significant adjustment. Financial circumstances related to any new relationships or cohabitation arrangements are also considered.

4. Determining Whether the Division is Just and Equitable

The final step ensures the division is just and equitable, meaning the Court must find the division fair. For example, if one party has a lower earning capacity or greater immediate financial needs, the Court may allocate more liquid assets (such as the proceeds from a house sale) to that party while awarding longer-term assets to the other.

What about Superannuation?

Superannuation is divided in the same way as other property however unlike other assets, it cannot be accessed until retirement age. The process when it comes to superannuation involves:

Valuing your superannuation
Agreeing on how it will be split
Applying to the Family Court for approval
Providing the superannuation trustee with the order for them to implement it.

Here at CK Lawyers, we can provide guidance on superannuation splitting and what you may be entitled to.

Conclusion

The division of assets in divorce or separation can often lead to disagreements, with each party having different views on contributions and what belongs in the asset pool. Expert legal advice is crucial to navigate this process and reach an agreement.

At CK Lawyers, we provide practical guidance on your entitlements, helping you to secure a fair outcome and reach an agreement more efficiently.

If you would like to discuss your Family Law matter with an expert, please contact me for a confidential consultation. Your first telephone consultation is free.

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