When you separate, your relationship property assets are equally divided.
This is in the Property (Relationships) Act 1976 (“The Act”). To familiarise yourself with the fundamentals of the Act, refer to our article here
S 11 of the Act states that each spouse is entitled to equal shares in the:
- Family Home
- Family Chattels (e.g. furniture, boat, and dog)
- And any other classified relationship property
The above would apply if you have no contracting out or separation agreement. However, there are exemptions to the equal division assumption, such as:
- Extraordinary circumstances that make equal sharing “repugnant to justice”;
- A short marriage;
- A short de facto relationship;
- Economic disparity between the spouse after separation;
- Two homes that qualify as the family home;
- One spouse sustained or diminished the value of another spouse’s separate property; and
- One spouse satisfied personal debts out of relationship property.
The Courts may find that equal sharing would create extreme injustice.
In cases like these, the courts will divide relationship property according to the contributions made by each spouse.
Here are some examples of extraordinary circumstances that are “repugnant to justice”:
- Wife financially and emotionally supported the family and the husband was an alcoholic;
- Wife financially supported and provided everything in the marriage, took care of the child and provided the funds for her husband for further studies. His earning capacity was greatly enhanced during this relationship as she was more established.
Factors that courts will consider when assessing exceptions
- Was there a gross disparity of contributions during the relationship
- The length of the relationship. The general rule is, the longer the relationship has been the more intermingled property becomes
- Was there any negative contribution such as one spouse acting in fraud, deceit or forgery towards their spouse.
- Gross misconduct of a spouse. This could include someone who is very abusive and they damaged the property in question
Factors courts will not consider
- The circumstances after the spouses cease to live together. For example, if one spouse after separation assumes the responsibility of maintaining the house and paying for its outgoings. Or if one spouse deserts the family and fails to maintain for them
- If one party owns the family home, this is not “extraordinary”.
Marriages of short duration
This is when spouses have lived together for less than three years. The division of property would be to each spouse’s contributions to the marriage if the assets were:
- Wholly owned or substantially by one partner; or
- Assets owned by one spouse through succession, survivorship, as a beneficiary, or as a gift; or
- One spouse contributed to the marriage disproportionately than the other.
Any other property or assets that fall outside of the above will be dealt with by the equal division rule.
De Facto Relationships of Short Duration
If there has been a de facto relationship of short duration where the de facto partners have lived together for less than three years or the court deems it to be a de facto relationship of short duration, then the Act will not apply. The exception to this would be if:
- There is a child in the de facto relationship
- One spouse has made a significant contribution to the de facto relationship
Each share will be determined according to individual contributions.
This section applies if the courts decide:
- After the relationship ends, the income of one spouse is likely to be higher; or
- One spouse was better off due to their role during the relationship.
Factors that courts may have regard to when drawing this conclusion:
- The likely earning capacity of each spouse
- The responsibilities of each spouse for the ongoing care of children
- Projected earnings of one spouse if they had scarified a career for the relationship
- The enhanced earning capacity of one spouse because of their respective roles in the relationship
- The age of each spouse
Two homes at the date when marriage or de facto relationship began
This applies during a relationship when each spouse owns a home that could be the family home. The courts will adjust the shares to relationship property to compensate for the inclusion of the home of only 1 spouse. This resolves any injustice that may have resulted.
As a result, this section is usually relevant for second marriages or ones that occur later in life where each spouse may own thier own house.
Sustained or diminished value of separate property
Sustenance is when one spouse’s property has been maintained by relationship property.
Large amounts of cases under this exception are related to farms. An example is where one spouse owns a farm that is separate property, but the non-owning spouse maintains the farm.
A Court will award compensation or displace equal sharing for this. But calculations in the past for this has been quite conservative.
Diminution is where separate property has been “materially diminished” in value by the one spouse’s actions. Courts may decide to diminish the shares of the other spouse as compensation.
Personal Debt satisfied out of Relationship Property
If one spouse satisfies their debts from the relationship property, the other may be compensated either by:
- A greater share in relationship property; or
- Some of the other spouse’s separate property is treated as relationship property; or
- An order for one spouse to pay the other.
Talk to one of the CODR team today to see whether your situation fits one of the above.
This article was written by Ashley Yuan.