•  

How to: The division of property when a marriage, civil union or de facto relationship ends

Introduction

The property of married, civil union and de facto couples (including same-sex couples) who have lived together for at least three years is divided (if there is a dispute) according to 'equal-sharing rules' under the Property (Relationships) Act.

The Property (Relationships) Act consists of a single set of laws that, with some exceptions, applies in the same way to married, civil union and de facto couples and also to when one of the spouses or partners dies.

If there is no dispute and a couple wishes to separate, then you may enter into a Separation Agreement.

If you've entered into a valid Property Agreement, the relationship property will be divided according to the terms of that agreement and not by the PROPERTY (RELATIONSHIPS) ACT  (this is referred to as "contracting out" of the Act). However, the agreement must be made according to strict requirements (including each party receiving independent legal advice), otherwise the agreement is invalid: see How to enter into your own property agreement.

The other option is a Pre-nuptial Agreement which essentially is again "contracting out" of the Act.


What is a "de facto relationship" under the Property (Relationships) Act?

A de facto relationship means a relationship between a woman and a man, or a woman and a woman, or a man and a man, who:

  • live together as a couple, but are not married to each other, and
  • are both 18 or older

In deciding whether two people live together as a couple, the court considers all the relevant circumstances, including any of the following if they are relevant:

  • the length of the relationship
  • the nature and extent of common residence
  • whether or not the couple have a sexual relationship
  • the degree of dependence or interdependence between the two people, and any arrangements for financial support between them
  • the ownership, use and acquisition of property
  • the degree of mutual commitment to a shared life
  • the care and support of children
  • the performance of household duties
  • the reputation and public aspects of the relationship

No single factor is essential for the two people to be considered as living together as a couple.

A de facto relationship ends if the two people cease to live together as a couple.

How long must we have lived together to be covered by the equal-sharing rules?

The equal-sharing rules apply to your marriage, civil union or de facto relationship only if you have lived together for at least three years.

A marriage, civil union or de facto relationship of less than three years is called a "relationship of short duration", and in general is not covered by the equal-sharing rules. See below, Marriages, civil unions and de facto relationships of `short duration' (less than three years)".

What if a married or civil union couple were in a de facto relationship immediately before?

In that case the length of the de facto relationship is counted in determining whether or not the marriage or civil union is of "short duration".

For example, if a couple have been married for two years but also lived together as a de facto couple for two years immediately before that, the couple is treated as having been married for four years.

"Relationship property" - The presumption of equal shares

The PROPERTY (RELATIONSHIPS) ACT classifies property under two headings: "relationship property" and "separate property".

Relationship property is divided equally, unless there are extraordinary circumstances that make equal sharing "repugnant to justice", in which case the relationship property is divided according to the contributions that each party made to the relationship.

In the assessing of the different contributions, financial contributions do not rate any more highly than contributions of other kinds, such as caring for children or performing domestic tasks.

There is just one rule for all relationship property - it is all divided equally unless there are extraordinary circumstances that make equal sharing repugnant to justice.

Separate property remains separate

In general, separate property (that is, all property not classed as relationship property) remains the property of the person who owns it and is not divided. It includes -

  • property that the parties owned before the marriage, civil union or relationship began and that they kept separate during it
  • any gifts and inheritances that the parties received during the marriage, civil union or relationship and that they kept separate

Separate property also includes all property acquired out of separate property, and the proceeds of selling any separate property.

But if an increase in the value of one party's separate property, or any income or gains derived from the property, is caused wholly or partly by the "application" of relationship property, then the increase, or the income or gains, is relationship property, not separate property.

Similarly, if an increase in the value of one party's separate property, or any income or gains derived from the property, is caused wholly or party by the actions of the other party, the increase, or the income or gains, is treated as relationship property, and is divided according to each party's contributions to the increase. This applies whether the other party's actions caused the increase directly or indirectly.

Marriages, civil unions and relationships of "short duration" (less than three years)

The equal-sharing rules apply to your marriage, civil union or de facto relationship only if you lived together for at least three years. A marriage, civil union or de facto relationship of less than three years is called a "relationship of short duration".

In the case of marriages or civil unions of short duration, special rules apply to decide how the property is divided, which mean that instead of there simply being equal shares, the property is divided according to the contributions the parties made to the marriage or civil union. In the case of de facto relationships of short duration, the Act doesn't apply at all (unless there are special circumstances, such as there being a child), which means that your legal rights will be determined by the ordinary rules of property ownership.

The court can decide to treat a marriage, civil union or de facto relationship of three years or more as if it were a relationship of short duration, if the court thinks this is just in all the circumstances.

Marriages and civil unions of short duration - In the case of a marriage or civil union of less than three years, equal sharing does not apply to -

  • the family home or a particular family chattel if it was owned wholly or substantially by one spouse or partner at the start of the marriage or civil union, or
  • the family home or a particular family chattel if it came to one spouse or partner, after the marriage or civil union began, by succession, by survivorship, as the beneficiary under a trust, or by gift from a third person, or
  • the family home and all the family chattels if the contribution of one spouse or partner to the marriage or civil union was clearly disproportionately greater than that of the other

In these cases, the share of each spouse or partner in the property in question is determined according to their contributions to the marriage or civil union.

In the case of relationship property other than the family home and chattels, each spouse or partner is entitled to share equally in the property unless his or her contribution to the marriage or civil union has been clearly greater than that of the other, in which case the shares are determined according to their contributions to the marriage or civil union.

De facto relationships of short duration - In the case of a de facto relationship of less than three years, the courts have no jurisdiction to divide property under the Act. This means that, in general, you are entitled only to property that you have legal title to: for example, if a house is owned jointly, you are entitled to a half-share. 

However, there is an exception to this, which applies when the court is satisfied

  • either that
    • there is a child of the relationship, or
    • the partner applying for division under the Act made a substantial contribution to the de facto relationship, and
  • that it would create serious injustice if the court didn't make an order under the Act

When this exception applies, the share of each de facto partner in the relationship property is determined according to each partner's contribution to the relationship.

What orders can the court make in dividing the property?

The court can make various orders in relation to the property or to a specific item of property to give effect to the division, such as ordering property to be sold or, in the case of the home, ordering that one party has the right to occupy the property. The court considers the interests of any dependent children.

In determining the amount and value of the property the court takes into account any outstanding debts.

Lump-sum payments to off-set future differences in income and living standards

The court may award a lump-sum payment to one party, or order a transfer of relationship or separate property, if the income and living standards of one party are likely to be significantly higher after the relationship ends than those of the other party, because of the effects of the division of functions within the marriage, civil union or de facto relationship.

This power is aimed at redressing the economic disadvantages faced by a partner who has not pursued a career while the other partner has – for example, if one partner supports the other through tertiary study or looks after the children.

Agreements to divide relationship property

If you've entered into a valid property agreement, the relationship property will be divided according to the terms of that agreement and not by the PROPERTY (RELATIONSHIPS) ACT  (this is referred to as "contracting out" of the Act). However, the agreement must be made according to strict requirements (including each party receiving independent legal advice), otherwise the agreement is invalid: see How to enter into your own property agreement.

If you can't agree between you on how to divide the property, you can apply to the Family Court or High Court to deal with the question under the provisions of the Act.

Dividing property under the Act when one of the couple dies

The new laws that came into effect in 2002 extended the equal-sharing rules so that they now apply not only when a marriage, civil union or de facto relationship breaks up, but also when one of the couple dies.

In that case, the surviving spouse or partner has the choice of either

  • having the relationship property divided under the rules in the PROPERTY (RELATIONSHIPS) ACT 1976, or
  • receiving whatever that spouse or partner is entitled to under the deceased's will or, if there is no will, under the statutory "rules of intestacy"

See How to contest a will and How to deal with a relative dying without a will.

Time limits for applying for property to be divided under the Property (Relationships) Act

If you have split up from your spouse or partner, you must apply to the Family Court within

  • 12 months after your marriage or civil union is dissolved, or
  • three years after your de facto relationship has ended

The Court can decide to extend the time limit, even if the time limit has already passed.

If your spouse or partner has died, and you choose to apply under the Act for relationship property to be divided, the relevant time limits depend on the size of your spouse's or partner's estate:

  • If it is a small estate that doesn't require a grant of administration from the High Court, you must complete a formal notice recording your choice within six months after the death of your spouse or partner, and apply to the Family Court within 12 months after their death.
  • If it is a larger estate requiring a grant of administration from the High Court, you must complete a formal notice recording your choice within six months after the date of the grant of administration, and then apply to the Family Court within 12 months after the date of the grant of administration.

Again, the Court can decide to extend these time limits, even if the relevant time limit has already passed.

Other law changes made in 2002

The changes that were made to the PROPERTY (RELATIONSHIPS) ACT in 2002 were accompanied by other changes giving de facto partners many of the same rights as people who are legally married:

  • Family protection claims - De facto partners can now apply to the court under the FAMILY PROTECTION ACT 1955 if they think that their deceased partner has not properly provided for them. See How to contest a will.
  • The "rules of intestacy" (when a person dies without a will) - The laws determining how a person's property is distributed if they die without leaving a will (called the "rules of intestacy") were amended so that a de facto partner has the same status as a legal spouse. For those rules, see How to deal with a relative dying without a will.
  • Spousal maintenance - The provisions in the FAMILY PROCEEDINGS ACT 1980 allowing for the court to award spousal maintenance to a spouse or ex-spouse now apply also to de facto couples. See How to apply for spousal or de facto maintenance.
Cautionary notes
  • Before a couple makes any agreement for the division of their property should they break up, each party must receive independent legal advice, otherwise the agreement is not valid.

  • Difficulties can occur when classifying property as either relationship or separate property, especially when -
    • it was inherited by one spouse or partner and has since been intermingled with relationship property, or

    • it was acquired in contemplation of a marriage, civil union or de facto relationship, or after a couple separated, or

    • it concerns insurance policies or superannuation funds



DIY self-help legal documents

You may wish to resolve your issue further and create your own affordable, legally binding outcome. Below are some cost effective DIY documents related to this HowTo article.









  Bookmark this page in your web browserwww.howtolaw.co - Home PageCartNo Items in your Cart