Find out more about non-financial contributions. What are they? Learn about other types of contributions and what happens to your property and money when you divorce. When you separate from your partner, you need to arrange the distribution of your property. Severing financial ties is a crucial step in establishing your financial independence and moving forward. Finding a way to divide your assets equally can be difficult because even though you may not have contributed financially, you may still have a right to a substantial share of the property pool. Establishing your non-financial contributions to the relationship can be complicated. Obtaining legal advice from an experienced family lawyer can help.
Let’s take a closer look.
ContributionsAfter couples separate, they need to find a way to divide what they own evenly. Finding out your entitlements can be complicated. When calculating a property settlement for parties establishing contributions made by each individual is a crucial step. The law looks at what you have contributed to the relationship during your time together. The types of contributions vary. They can be financial, non-financial, parental or initial contributions. As per federal legislation, the court also needs to assess contributions to the marital assets from both direct and indirect financial contributions. An example of a direct contribution is a lump sum payment to reduce the mortgage. A typical indirect contribution in a family law matter could include using your income to cover household expenses, allowing the other party to focus their finance on repayment of the home loan, which can indirectly contribute to the property’s acquisition.
What Are Non Financial Contributions In Family Law?Numerous tasks can be considered a non financial contribution, and they all are related to the acquisition in some way. While they can’t initially present a monetary reward, they will often add value, maintain, conserve or improve the asset. Completing services or tasks within the marital home, like building a fence, painting, paving, constructing a pergola, gardening and landscaping, are all considered a non-financial contribution. A professional tradesperson may have been required to complete the work had that person not completed it themselves. The labour and renovations have saved money, time and increased the property’s value.
Parental and Homemaker ContributionsContributions that benefit the family’s welfare as a parent and homemaker are considered when determining what each party has brought to the relationship. The court considers the homemaker’s contributions as crucial as the financial contribution from the income earner in the relationship. Some examples of care and welfare of the family include taking children to school, sports and extracurricular activities. The one party who manages the household, takes care of the children, maintains and improves the matrimonial home, enables the other party to focus on earning a wage that can be used to reduce the mortgage. The homemaker is indirectly providing a non-financial contribution to the family home. For example, the wife who stayed at home and looked after the children allowed the husband to earn a full-time income will have provided an equal and relevant contribution to the marriage. Whilst they may seem like minor contributions, if relevant evidence is presented to the court, it may contribute an additional percentage to that party. It may be considered equal weight to that of a financial contribution.
Financial ContributionsAn example of financial contributions can be a deposit for a first home, significant assets, a regular salary to make loan repayments, bill payments, groceries and contributions to superannuation. Ownership of property or land used to build a family home or substantial superannuation brought into the relationship at the start is an initial financial contribution. Financial contributions made by each party to a relationship is not just about a lump sum of money or earnings. It can also include gifts inheritances, pensions, compensation payments and payments towards the acquisition, maintenance, or any improvement to the property during the relationship.
Family MembersFamily members may have provided financial assistance in some instances, whether a lump sum for a house deposit or an interest-free loan. Usually, financial aid from parents will be considered an increase in the settlement for the related party as it was made on their behalf.
GiftsIf both parties have received a financial gift, the court will need to determine who the gift’s intended recipient was. For example, during their relationship, the couple may have received a cash gift from a friend or family member for landscaping. In this instance, evidence may be required to help ascertain the intended recipient.
Initial ContributionsInitial contributions are an essential step in calculating the value of the matrimonial asset pool. At the beginning of a relationship, the direct financial contributions made by each party can be used to determine the percentage of their separation settlement, which could result in an adjustment in their favour. The contribution is assessed, given a monetary value, and a calculated percentage of the total property pool is determined. The more an individual has contributed to the relationship, the larger the adjustment or share of the matrimonial asset pool they receive. For example, if one party owned a business at the start of their relationship and it was the primary source of income during their time together, it would result in an adjusted property settlement in their favour. There are circumstances where this may not occur. For example, the number of years the parties were in a relationship can adjust the validity of the initial contributions.
Post Separation ContributionsThe assessment is conducted when the parties financial agreement is finalised or at the trial. This means that contributions made by each party after separation are also taken into account. For example, working to support the household, pay down debts, and care for the children will continue somewhat during this period and is considered in the final property calculation.
SuperannuationSuperannuation has been considered a part of the pool of marriage assets for almost 20 years. The court will consider factors when determining the share of super for each party. It may be split at an agreed percentage or be added to the share that the non-member receives in other property, i.e. they receive a more significant proportion of the marital home. The law provides detailed formulas to calculate the value of your superannuation. Discussing matters with experienced lawyers can ensure that you receive relevant advice and all of your property entitlements.
The Length Of A RelationshipThe length of a relationship can significantly influence the property settlement outcome. With any relationship over five years, the court takes a broader view, which means that the initial contribution to the relationship may not have as much of an impact as more recent ones and may even outweigh them. In a long relationship, over ten years, an initial contribution at the start of a partnership may lose its relevance. It does not diminish but instead is offset by the contributions from both parties during their time together. Mutual support, interdependence and decisions made together for the benefit of the family all increase with time spent together as a couple. The court will consider contributions made at different stages in the relationship. A short relationship of fewer than five years will be assessed differently. The initial contribution would still make up most of the property pool, and joint assets may still be minor in comparison.
Property SettlementAfter a relationship breaks down, If parties can agree on a settlement without going to court, it can save them money and time. It also ensures that decisions can be decided together instead of a court ruling that may not be favourable. The court will consider what each party brought to the relationship and what they contributed during their time together. Adjustments will be made depending on the individual circumstances. The court will consider any challenges either person could face after proceedings and if they will be the primary carer for the children, in which case they will most likely receive an adjustment in their favour. Seeking legal advice from qualified lawyers at this time is essential to help resolve the matter as quickly and fairly as possible.
TimingSorting out settlements quickly after a divorce is vital as time limits apply if you intend on going to court for consent orders. After your divorce is final, you have 12 months to apply to the court for property orders. If you do not adhere to these time frames, you will need to request permission from the court, and orders may not be granted. It is not necessary to wait until your divorce is finalised to commence proceedings. In a de facto relationship, you would have two years to apply.
What is Property?In property settlement and family law matters, “property” refers to the assets and debts accrued by the couple during their relationship. It is also known as the asset or property pool. Some examples include:
- The Family Home
- Bank Accounts
- Insurance Policies
- Family Trusts
- Debts – mortgage, loan, credit card, and personal debt
Five-Step TestThe court will determine the individual entitlements for each party by using the five-step test. Using the legislative framework as a guide, they can effectively and fairly determine an equitable property split.
- First, they will ascertain whether any adjustments need to occur, considering what is fair and equitable. For example, if the relationship was short and the parties maintained separate finances, then there may not be a need for any adjustments.
- The assets and liabilities are the basis of the property pool. The court will accurately identify and value household items and financial assets such as shares, stocks, and investments.
- The contributions of each party will be assessed, and it can include direct financial, parental and non financial.
- As per the Family Law Act 1975, the court will assess the future needs of each party. With reference to:
- Care and responsibility for their children
- Mental capacity of each party
- Other health related issues
- Limited future earning capacity or ability to find employment
- Personal financial resources
- The last step ensures that the proposed division of the property pool is fair to both parties.