The Family Law Act sets out a four step process to determine “what is a just and equitable (fair) settlement?”
The first step is to identify what assets and liabilities each person had at the beginning of the relationship. Sometimes, both people will have had assets of a similar value and included some household furniture, a car and some cash. Other times, one person may have had a significantly greater value of assets than the other and included a house, shares or superannuation.
If one person has significantly greater assets at the beginning of the relationship, this will generally be reflected in their favour and more so the shorter the relationship.
The second step is to look at what contributions, both financial and non-financial and direct and indirect, each person made during the relationship. Financial contributions may involve a salary from employment or income from business activities. Non-financial contributions may involve work around the house/yard, caring for the children or renovations/improvements for example. The court will also consider such contributions made by members of the person’s family such as gifts or babysitting.
The role of breadwinner and care provider are generally weighted evenly.
There are also contributions which are called “windfalls”. These include inheritances, compensation payments and the like and are attributed to the person that they relate to.
The third step involves looking into the future following separation to see if one person will be in a better position than the other financially for some particular reason. For example, one person may have a greater earning capacity or may have to be the primary care provider of three young children. Other factors impacting on future financial circumstances may include age, health or receipt of child support/not.
Having regard to all of the above, a percentage split of the total value of the asset pool can be assessed. Then the fourth step can be completed which is to look at each person’s circumstances to see if there needs to be any further adjustment to arrive at a final division that is just and equitable.
If you want to find out what is a just and equitable division of assets for your matter, then please contact our office for an initial consultation.