When is the Best Time to Separate and do a Family Law Property Settlement in Australia?

Whilst you have to wait at least 12 months from the date you separate to apply for a Divorce, you do not have to wait to finalise a property settlement with your spouse or partner under the Family Law Act.  The Divorce Application in Australia is a separate legal proceeding and it brings a marriage to an end legally, and allows you to marry someone else if you wish to do so.  You cannot apply for a Divorce before the 12-month separation period has expired- even if both parties agree.  The situation is different when it comes to negotiating and finalising a property settlement and parenting arrangements- this can happen as soon as you separate without having to wait.

In order to advise as to what an appropriate property settlement should be in your circumstances, we need to ascertain the value of current assets, liabilities and Superannuation.  These values change over time and, if you wait before undertaking a property settlement, we do not use the values as at the separation date- the law requires us to use the values at that future time.  A delay could advantage one party and disadvantage the other.  The following is an example from one of our clients’ real-life cases (not using their real names) which illustrates this.

Case Study

Andrew and Darlene

Andrew, a Corporate Manager earning $140,000 gross per year, and Darlene, a Nurse earning $75,000 a year, separate in March 2016 after a 16-year marriage.  They have two children, aged 8 and 9, who live with Darlene and Andrew in alternate weeks.  Andrew and Darlene have lived the high life spending all of their income and running up debt.  Their only asset is a family home valued at $1.5M subject to a $1M loan.  Andrew has about $300,000 in Superannuation and Darlene has $100,000 in Superannuation.  Andrew is keen to have a quick settlement and offers Darlene a $100,000 Superannuation Split to equalise their Superannuation and 60% of the net sale proceeds of the family home (giving her about $300,000 cash).  If Darlene accepts this offer (which is within the range of what the Family Court would deem to be a just and equitable result) the net result for each of them would be as follows:

Darlene receives:

Share of House net sale proceeds

$300,000

Superannuation

$200,000

Total

$500,000

 

Andrew receives:

Share of House net sale proceeds

$200,000

Superannuation

$200,000

Total

$400,000

 

But, Darlene adopts an ambitious approach, and will not settle for anything less than 65%, which would require Andrew to sacrifice a further $25,000.   Darlene refuses to put the family home up for sale.  Andrew throws up his arms, exasperated by Darlene’s attitude, and does nothing more to try to settle the case as he does not want to waste any more money on lawyers.  Darlene sits tight as she is living in the family home. 

In mid-2017, Andrew lands a job as CEO in the company he works for.  The job is based in Sydney and he now earns $350,000 gross per year.  As a result of Andrew being based in Sydney, the week-about shared care arrangement for the children is no longer feasible and Darlene has the care of the children nearly full time, except for the odd weekend when Andrew comes back to Melbourne.  To further complicate things, the youngest child is diagnosed with a rare immune deficiency disease, which results in her getting sick and missing school regularly.  Darlene cannot work as much now, due to her additional child caring responsibilities and her income drops to $20,000 per year. 

It is now December 2019, and the house has increased in value to $2.5M due to a property developer buying up properties in their street for a multi-unit development.  Andrew has also accumulated savings of $100,000 and additional Superannuation.  The family’s net assets are now:

House

$2,500,000

 

-Mortgage loan

$1,000,000

 

Net Equity

 

$1,500,000

Andrew’s Savings

 

$100,000

Total Net Assets

 

$1,600,000

 

Andrew’s Superannuation is now $400,000 and Darlene’s Superannuation is now $120,000.

Darlene instructs Melbourne Family Lawyers to now engage in settlement negotiations through a Private Mediation. Due to Darlene’s increased child caring responsibilities, her reduction in income and Andrew’s increased income, we are able to settle on the basis that Darlene receives 67% of the total net assets and an equalisation of Superannuation.  The result is:

Darlene receives:

Share of House net sale proceeds

$1,072,000

Superannuation

$260,000

Total

$1,332,000

 

Andrew receives:

Share of House net sale proceeds

$428,000

Andrew’s Savings

$100,000

Superannuation

$260,000

Total

$788,000

 

Had Darlene settled in 2016, she would have been much worse off financially.  She now has $1M to buy a house for herself and more Superannuation for the future.  Timing can make all the difference.

If you are faced with any of these issues, it is essential to obtain the best Family Law legal advice available.  Telephone Melbourne Family Lawyers on +613 9670 9677 or make an enquiry.

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