Property matters are an important consideration after a separation in New South Wales (NSW). However, there are some mistakes parties often make that can result in delays and increased costs. When you know what to look out for, spouses and de facto partners can more easily avoid these pitfalls. Here are some common errors that are made during property settlement proceedings.
Key takeaways
There are generally deadlines for family law property orders.
Non-disclosure may cause a financial agreement to be set aside.
Superannuation interests are calculated based on each parties contribution.
Non-disclosure in property proceedings may lead to various consequences.
The economic impact of family violence should be considered in property settlements.
Improper assessment of a party’s future needs may result in unfair settlements.
Informal property arrangements can lead to future challenges.
Being unaware of tax implications may lead to higher CGT costs.
Mishandling companion animals in property settlements can lead to emotional distress.
Time limits for property orders after separation
Some ways of organising financial matters may have a deadline. For financial or property orders, the following deadlines may apply:
Legally married couples should generally start the settlement within 12 months of the divorce order.
De facto relationships should generally start the settlement within 2 years of the separation date.
If you miss this deadline, you may not be able to apply for property orders without the Court’s permission. Under section 44 of the Family Law Act 1975 (Cth), the Federal Circuit and Family Court of Australia (FCFCOA) may grant leave to apply outside of this deadline, but only in limited circumstances. The test for leave is not straightforward and depends on your individual circumstances. You should get legal advice from a NSW lawyer about your matter.
Trying to settle without identifying the total asset pool
It’s risky to make a binding financial agreement (BFA) or a consent order without identifying the whole property pool. It may be that only certain high-value assets are relevant to the agreement. It’s still important to understand all financial details. This may include:
Bank accounts.
Stock portfolios.
Investment properties.
Financial resources, such as a testamentary trust.
Personal debts.
Mortgages.
If a party hasn’t been fully open about their financial position, there could be a property settlement dispute later on. Reasons why the FCFCOA may set aside Consent Orders or a BFA for inadequate disclosure include:
Refusing to make the order.
Requiring additional financial information.
Amending orders that have already been made.
Reasons why the FCFCOA may set aside a BFA for inadequate disclosure include:
The agreement is found to have been arrived at fraudulently due to non-disclosure of a material matter. The FCFCOA may think that one party is trying to get an unfair advantage by leaving out certain assets.
Leaving out certain property may result in an agreement that the FCFCOA finds isn’t fair to one party.
For a binding financial agreement to be enforceable under the Family Law Act 1975 (Cth), each party should generally receive independent legal advice. Your lawyer can also help to ensure that full disclosure is made.
Assuming superannuation is split 50/50
The rules around superannuation splitting can be complex. If superannuation is included in the settlement, there are different ways that it can be managed. For example, a party may receive a lump sum payment either as a fixed amount or as a percentage of the spouses superannuation interest, the non-member spouse’s split may take various forms, such as:
A lump sum payment.
A percentage of each of the member spouse’s income payments.
A base amount of each of the member spouse’s income payments.
This means that superannuation is often not divided evenly. Family law courts do not apply a fixed percentage split to superannuation. The Court considers a range of factors, including each party’s contributions, future needs and what is just and equitable when deciding how superannuation interests should be treated. The division will depend on the parties’ circumstances.
Missing the duty of financial disclosure in the Family Law Act
Under Australian family law, property settlement cases generally need to be based on an accurate determination of each party’s financial circumstances. This can involve producing bank statements and other documentation. Non-disclosure can lead to significant consequences, such as:
Facing a costs order to pay the other party’s legal expenses.
Having the property settlement set aside.
The FCFCOA may make an adjustment to the financial order to account for the breach.
Understanding common myths about family law property settlements can help you navigate the disclosure process.
Overlooking the economic effects of family violence
The Family Law Amendment Act 2024 made economic or financial abuse a part of the definition of family violence. This has implications for how the FCFCOA approaches family law property cases. The Court considers:
Direct financial contributions.
Indirect financial contributions.
Non-financial contributions.
Family violence matters are now factored into each party’s ability to contribute to the relationship. It may also be a part of deciding what their future needs are.
If you or someone you know is experiencing family violence, you can contact:
1800RESPECT on 1800 737 732.
Domestic Violence Line (NSW) on 1800 65 64 63.
In an emergency, call 000.
Ignoring future needs factors
The future needs of the parties can be crucial to getting a just and equitable adjustment. Relationship breakdowns often don’t impact each partner’s finances equally. The FCFCOA may look at a lot of factors, such as:
Future earning capacity.
Age and health.
Caring responsibilities.
Access to finances.
Parties who don’t think about this matter enough may end up in a more difficult position post-separation. Neglecting your future needs may prevent you from accessing potential financial support, such as spousal maintenance or child support.
Settling without consent orders or a BFA
Some ex-partners settle their property issues privately. These arrangements may get challenged later. For example, one person may transfer certain assets to their former partner. They assume the arrangement is final. However, the other party may disagree. It can be very difficult to show that an enforceable agreement is in place.
One party may also enter an unfair agreement without proper advice. Legal oversight can help reduce the chances of unfair divisions.
Not considering tax consequences when transferring property
There are various tax implications that couples may face when they separate. Separating couples may be able to access the following benefits, depending on their circumstances:
Relationship breakdown rollover is when a separating couple creates a legally enforceable settlement, the capital gains tax (CGT) that can arise from the transfer of assets may be deferred. CGT may be payable once the receiving party sells the asset.
Main residence exemption is if you were transferred the family home in a settlement, you may be able to claim a full or partial exemption to CGT if you sell it. Refer to the Australian Taxation Office’s website for the eligibility criteria.
If you don’t form a legally recognised settlement, you may be subject to additional CGT. Outcomes depend on your tax position. Consider working with a registered tax agent in NSW for advice. For more detailed guidance, read our article on the power of the ATO and family law settlements.
Forgetting that companion animals are now treated separately
Under the Family Law Amendment Act 2024, companion animals are generally defined as animals kept primarily for companionship, as opposed to an assistance animal. The definition also does not relate to animals kept for business or agricultural purposes.
The amendment makes provisions for companion animals to be treated separately from other property. The FCFCOA may make orders for one party to have sole ownership, for the animal to be transferred to the other party, or for the animal to be sold. The Court cannot make an order for joint ownership.
Family pets are a common point of disagreement for couples in NSW. Informal arrangements sometimes do not survive disputes over property. This can lead to emotional conflicts between family members. Using appropriate dispute resolution to make formal arrangements for any pets can help former partners avoid unnecessary conflicts.
Conclusion
Property settlements are a common part of the separation process. But there are a lot of mistakes that can be made along the way. When you know what to watch out for, you can more effectively avoid pitfalls. Many people seek professional help to assist with family law proceedings.
It’s also important to consider your child’s wellbeing during this time. Learn more about protecting your children during divorce and parenting arrangements.
Get legal advice
Are you seeking legal advice from a Revesby family lawyer? Contact us to organise a free initial consultation.
Disclaimer: This article provides general information only. It is not legal advice. Family law outcomes depend on your circumstances. You should speak with a family lawyer before making decisions about your matter.
References
Family Law Act 1975 (Cth), https://www.legislation.gov.au/C2004A02488/latest/text
Family Law Amendment Act 2024 (Cth), https://www.legislation.gov.au/
Federal Circuit and Family Court of Australia, https://www.fcfcoa.gov.au/
Australian Taxation Office- Relationship breakdown and capital gains tax, https://www.ato.gov.au/individuals-and-families/investments-and-assets/capital-gains-tax/relationship-breakdown-and-capital-gains-tax
1800RESPECT- National Sexual Assault, Domestic Family Violence Counselling Service, https://www.1800respect.org.au/
Bruce Batey
Bruce Batey is a Director of Bateys Law Firm, specialising in Family Law, Wills and Estate Planning. Known for his compassionate, client-focused approach, he is passionate about protecting families against the unexpected and delivering the best possible outcomes in a caring, professional environment.
Bruce is a past President of the Bankstown and District Branch of the Law Society and a former White Ribbon ambassador. In his spare time, he is a member of the NSW Fire and Rescue Band, where he plays cornet, and enjoys reading and listening to classical music.
