Saturday, 31 January 2009

How to cut a property settlement deal when you were married

Property settlements between husbands and wives (or former husbands and wives) happen in three ways:

  • an informal deal (this may also involve a lot of paperwork and possibly what are otherwise seen as binding agreements, such as contracts)

  • orders under the Family Law Act

  • a binding financial agreement

To which people does the Family Law Act apply?

The Family Law Act applies to all people who are or were married, and the marriage is recognised in Australia. Some marriages are not recognised in Australia, for example:

  • polygamous marriages (although these may be covered under the de facto changes to the Family Law Act which have passed Federal Parliament, and are to come into effect shortly);

  • same sex marriages (again, the de facto provisions may apply when force later this year. For all relationships considered de facto relationships, existing State and Territory laws may apply.)

Is there any minimum period for people to be married before a property settlement can be sought?

Provided that the parties have separated and their marriage has broken down- the answer is "no".

In which States and Territories does the Family Law Act apply?

The Family Law Act applies in all States and Territories, including Norfolk Island. Incidentally, property settlement matters from Norfolk are usually heard in Brisbane or Sydney.

Are there any time limits?

Proceedings for property settlement (and spousal maintenance) must be brought within 1 year of divorce, or permission from the court is required before they can be commenced. The court is not obliged to give permission - it is a matter of discretion, and is not guaranteed.

Informal property settlement

Except for those with minimal property, this is not recommended. If an informal property settlement has occurred, then capital gains tax and stamp duty might have to be paid (which could otherwise have been avoided through properly formalising the deal). Because it is an informal property settlement, then unless the time limits apply, the person who feels that they have not received enough can apply to the court for property settlement, i.e., ask for more.

Sometimes this can have far reaching results. In one case, for example, well after the parties separated (they were broke), the husband won first prize in the lotto. The Family Court awarded a share of the prize to the wife.

It is always best to get advice from a good family lawyer.

Even if you have entered into a contract with your ex, if it is not an order or binding financial agreement under the Family Law Act it may provide no certainty at all as it does not prevent the other party (or you) from making a property settlement claim under the Family Law Act. Often financiers will insist on orders or a binding financial agreement being entered into before they lend money.


This is the most common method of resolving property settlement.

Most orders are not made by any type of court fight, but after an agreed outcome, with the deal being struck after negotiations of some kind- directly between the parties, through their lawyers, or with the assistance of someone like a mediator. These orders are made by the Family Court and State Magistrate or Local Courts, usually without the need (and bother and expense) of any court appearance. Because each of the parties is agreeing to the making of orders, these orders are commonly known as "consent orders".

Orders provide certainty, thereby do not prevent refinancing from taking place (which an informal property settlement could do), and provide tax breaks for both stamp duty and capital gains tax.

Consent orders are binding in the same way as orders made after court proceedings. Their form is exactly the same. The differences are obvious- it is usually:

  • quicker

  • cheaper, and

  • simpler

to have consent orders at the beginning, rather than have to go to court.

The courts encourage people to settle rather than go to trial. A small percentage of matters goes to trial- usually about 3-5% of matters filed. Most of the rest are resolved by consent orders.

Binding financial agreements

These are agreements in a particular form signed by the parties, by which they contract out of the Family Law Act, and enable a property settlement to take place. Binding financial agreements have their place.

Some family lawyers use them a lot, and others refuse to use them.

Binding financial agreements give certainty to property settlement (and have some advantages to consent orders). However, there are two features about binding financial agreements that mean people are more inclined to have consent orders than binding financial agreements:

  • to get a consent order drawn up is usually quicker and cheaper than having a binding financial agreement drawn up

  • the Family Court has signalled that it requires strict compliance with rules associated with binding financial agreements, and that if there has not been strict compliance, the agreement is struck down, meaning - back to square one with the property settlement.


Getting an experienced family lawyer to draw up the documents will usually provide certainty to the deal, which should save money and grief.


Anonymous said...

If a property settlement agreement was drawn up and signed while both parties (Australian citizens) were living in the US under US state law, and then divorce was finalized in Australia (one party currently living in Australia and the other still in the US), who would have more obvious jurisdiction over modifications of the agreement (alimony) due to change in circumstances. US or Australian courts?

Unknown said...

I think just to be safer you will also need a binding financial agreement for Australia detailing property and spousal and child support. It is signed by both parties and each party must get an independent legal certificate from Australian lawyers. If there is fixed property in Australia (houses) then Australian courts have juristriction. If the assets are bank accounts in the US or Australia then these can also be included in the Australian agreement. Properties in the US remain the juristriction of the US courts. Spousal and child maintenance orders can be enforced internationally. See Attorney Generals department Australia section on International family law. If a variation is sort then you would need to seek court orders and explain the change in circumstances probably in both coutries.

Anonymous said...

If custody of children has not been agreed, can a property settlement still be resolved? And if property is resolved first, how then is custody affected financially.

Anonymous said...

In a divorce, does it matter who files for it first?

If the house which the married couple lived in was owned solely by the husband before they were married, will the wife have the right to claim 50% of it? Let's say the marriage lasted for less than 5 years.

Anonymous said...

Don't klnow but this is my position also. I bought my house in the early 90's, 95% paid for when we met. Morgage is now higher than it was when we met 9 years ago. My wife had no significant assets when we met and had sizeable debts. We have two 7yo daughters shared care. I also supported her other two children.