Last updated 8 August 2016

After assessing each party’s entitlement to the available property, the next step is to decide how to distribute the property between the parties.

Farming enterprises and other small businesses are not afforded any special treatment or protection in property settlements (Way & Way (1996) FLC 92–702). If the parties are able to reach agreement about a property settlement by themselves, they can determine the distribution of assets and the way any necessary financial adjustments will be funded. However, if the matter proceeds to a court hearing, the judge will have the final say on the distribution of the assets. In complex cases, the judge will often leave it to the parties to formulate the exact distribution of the assets in accordance with the court’s decision about the percentage entitlements of each of the parties, taking into account the findings of the court in relation to the property of the parties and the appropriate percentage division between the parties.

Difficulties in distributing property

The following types of property often present problems in property settlements for the court and the parties:

  • small estate versus substantial resources or earning capacity—it is sometimes the case that the parties have very little property available for immediate division between them, but one of the parties has a significant resource that will be realised in due course (e.g. an entitlement under a family trust) (Grace & Grace (1998) FLC 92–792). In this instance, the court may be prepared to postpone the property proceedings until the interest falls into the parties’ hands (s 79(5) Family Law Act 1975 (Cth) (Family Law Act))

 

  • a small or modest estate, where one party has a significant earning capacity which may have been acquired and developed during the marriage. The court may transfer all of the available net property to the spouse in lesser financial circumstances, coupled with a significant spousal maintenance order (e.g. an annual lump sum payment) (Best & Best (1993) FLC 92–418)

 

  • long service leave—if a party entitled to long service leave intends to retire, and their employer will provide the long service leave as a cash sum, then the court may take the entitlement into account as a financial resource (see Tomasetti v Tomasetti (2000) FLC 93–023). Long service leave entitlements will be treated as property if they have been received in cash at the time of the court hearing. If the person must take the leave, then it is not a capital sum and will not be taken into account

 

  • marriages of short duration—given the asset-by-asset approach is preferable, it is usual for the parties to receive the property that they brought to the relationship. The property acquired during the marriage is divided between them in accordance with the contributions and s 75(2) of the Family Law Act factors, with emphasis on the financial contributions when there are no children of the relationship

 

  • jewellery—the court sometimes disregards items of jewellery as property, unless it is of significant value or has been acquired for investment purposes

 

  • interest in trusts—spouses sometimes transfer assets out of their name into a family trust. The legal owner of the trust property is the trustee (often a company). The spouses are usually beneficiaries of the trust. The court will carefully look at the circumstances of each trust, including the terms of the relevant trust deed, to determine whether the property of the trust is really the property of the parties (or one of them) or a financial resource of the parties (Goodwin & Goodwin Alpe (1991) FLC 92–192). If the court is satisfied that a party has control of the assets of a trust (e.g. has been applying those assets and the income for their own use), then the court may treat the assets of the trust as the assets or a financial resource of the party. A party who alienates any assets through disposing of them to a trust, even if it occurs prior to the marriage, will not necessarily avoid those assets being included in the property pool (Kennon v Spry [2008] HCA 56)

 

  • gifts— the court will determine the ownership of that gift and which party made the contribution. When a gift is made by relatives solely to one spouse who uses it, the gift will be considered as a direct financial contribution of that spouse (e.g. rent-free accommodation by the wife’s parents (Pellegrino & Pellegrino (1997) FLC 92–789)). If the property is gifted to both parties, the court will look at the person giving it and determine whether it was given to one or both parties. The gift will be treated as an asset, and the contribution will be assessed (e.g. a contribution by a parent of one party will be considered a contribution made by, or on behalf of, that party only unless evidence shows it was not the intention of the parent to benefit only their child (Kessey & Kessey (1994) FLC 92–495))

 

  • windfalls—windfalls such as lotto winnings during the course of the marriage are usually assets to be distributed between the parties. The court will carefully consider who contributed to the windfall and examine the effort made to achieve it, the time it was made and other circumstances surrounding its making. In most cases, the court will find that the windfall should not be treated differently to any other matrimonial property (Elford v Elford [2016] Fam CAFC 45)

 

  • inheritances—an inheritance does not fall into a protected category and is treated the same as other matrimonial property. However, a recent inheritance may be excluded from the pool and treated as an entitlement of the party who received it, if there are ample other funds to be divided between the parties. The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship or after it has ended, except in very unusual circumstances (Figgins v Figgins (2002) FLC 93–122). Often the only adjustment that will occur in relation to that late or post-separation inheritance, will be due to the future needs of the other party (s 75(2)  Family Law Act)

 

  • prospective inheritance—an expectancy of inheritance by a spouse will not be relevant in many property settlement proceedings, because ultimately it will depend upon the nature of the claims and the facts of the particular case. An expectancy is not a financial resource but it may be taken into account under s 75(2)(o) of the Family Law Act, which enables the court to take into account any other relevant circumstances (De Angelis & De Angelis (2003) FLC 93–133)

 

  • personal injuries damages and other awards by a court—money received as damages in a personal injuries claim will be treated as an asset of the parties if it is received during the marriage. When a personal injuries action remains undetermined, the potential personal injuries award may not be taken into account in a property settlement or the proceedings for property settlement may need to be adjourned to enable the personal injuries proceedings to be finalised.