A divorce or separation is a stressful time for all of the parties involved. There is a lot to consider at the end of the relationship, including property settlement.
Many couples can agree on the division of marital assets outside of court. Some couples are unable to and may need to use the Family Court to help them reach a settlement.
This article will explain what assets are included in the matrimonial asset pool, how the value is decided, what to expect in the proceedings and what happens to a business that is owned jointly.
What’s included in a matrimonial asset pool?
The matrimonial asset pool consists of all property in which you or the other party have any legal or beneficial interest in. Assets are included whether they are owned jointly or separately.
Marital property that will be divided in any proceedings includes real estate such as investment properties or the family home, household items, motor vehicles, boats, businesses, income (wages, dividends etc.), life insurance policies, money held in bank accounts or superannuation.
Debts such as a mortgage, credit cards or loans will also be included in the matrimonial asset pool.
What happens if the assets are disposed of prior to the trial?
If the assets are disposed of before the settlement, the Family Court of Australia will consider what has happened to these assets as part of the property division. This could mean that the court will add the value of the asset back to any calculations.
For example, if you acquired a boat during the marriage and then sold it before settlement, the court may add the value of the boat back into the asset pool assessment.
How can I stop my ex from disposing assets in a property settlement?
If you are worried that your ex-partner may dispose of any assets before the matter is finalised in court, you can apply for a court order that prevents the sale of the assets. It can be enforced if the other party does not comply with the order.
If you have a suspicion that your ex-partner may dispose of assets, it is important to seek legal advice as early as possible so that your family lawyer may write to your ex putting them on notice that they cannot dispose of any matrimonial assets before a final agreement is reached. Obtaining early legal advice can make a huge difference to the outcome of the proceedings.
Our expert family lawyers can definitely help you with this and are are available on 1300 667 461.
How are matrimonial assets valued?
The court acknowledges that the value of assets may change from the date of separation, to the date of the court proceedings. Therefore, the value of the assets will be taken on the date of the trial.
Real estate is often the biggest matrimonial asset in a relationship. More often than not, the two parties will reach an agreement after a valuation or appraisal from a real estate agent or a property valuer. The courts prefer independent property valuations.
You should always get a business valued by an independent valuer, even if the business has an in-house accountant. The value of some businesses will be determined by deducting the liabilities from the assets. Other businesses will require a more complex valuation.
A valuer can assess the value of a motor vehicle. If the value is likely to be low, then it might be easier to look at comparable car models. You can then agree to a price based on comparable car model listings.
Furniture and jewellery
The courts generally adopt a conservative approach when valuing furniture or jewellery. This means they’ll use the second-hand sale value, not the insured or replacement value.
You can use independent valuers, however you need to weigh up the benefit with the value of the item. For low-value items, it may not be worthwhile using a valuer.
What if parties disagree on the value?
If you and the other party cannot agree on the value of the matrimonial property, you will need to attend mediation or a dispute resolution service. If you still cannot agree on the value, an independent valuation will be necessary to determine the value. The court can also adjust the value of property.
Requirements for a valuation
If you cannot agree on the value of the matrimonial assets with the other party, it is necessary to obtain an independent valuation.
The independent valuation should be conducted by a person who is qualified to make such assessments. If the valuation is not independent, there is a risk that the court will not accept it.
This could result in the case being adjourned until an expert valuation can be obtained. The court may also decide to appoint their own valuer.
Expert evidence might be needed
If you and the other party cannot agree on the value of your shared property, you may need to rely on expert evidence for your dispute. Expert evidence should only be used when:
- there is a major dispute;
- it is necessary to resolve issues in a case;
- it will not compromise the interests of justice;
- it will reduce the costs involved in appointing multiple experts;
- it is necessary so justice can be served.
If expert evidence is equired, the court will decide whether it should be a valuation from a single expert. In most cases the Family Court will only rely on one single expert.
After the single expert’s report has been completed, the parties involved in the case may want to ask questions. Each party must do so within 21 days.
If the court appoints their own single expert to give evidence on a particular issue, the parties in the case must not adduce evidence or additional reports without first getting the court’s permission.
What are the benefits of a single expert?
In some property settlement cases the court will appoint a single expert. A single expert is a property valuer that has been registered and certified by the Australian Property Institute.
The advantage to having a jointly appointed property valuer is that you and the other party can share the cost of the report.
Using a single expert guarantees that the court will accept the valuation as evidence in a family proceeding. This saves you having to ask the court to accept evidence.
What is the valuation process?
A single expert will arrive at the property’s worth, based on the fair market value. The fair market value is the price that a buyer who is not acting under duress would be willing to pay for property.
There are different methodologies used to determine the value of a property. One method is to directly compare the property with recent sales. The single expert will then need to justify why they arrived at that particular value.
Following the valuation, the single expert will write a report, which will contain photos and a description of the property, plus details of their analysis.
They will also need to provide an affidavit confirming the details of the report and that they have complied with the Family Court’s rules.
What if I don’t agree with the valuation report?
If you, or the other party disagree with the valuation report you can ask the single expert questions within 21 days of receiving the report. You must ask these questions in writing and they must be provided to all parties involved in the proceedings.
If you receive answers from the single expert and there are still unresolved issues, you can obtain your own private report from another expert witness. If there is more than 10% difference in the valuation, you can consider applying to the court to lead conflicting evidence.
If you want the court to rely on your report, you will need to get the court’s permission to do so. They will only grant leave in certain circumstances, which include:
- there is substantial information that contradicts the single expert;
- another expert witness knows of issues that are not known to the single expert that are necessary in determining the issue; or
- there is another reason for adducing evidence from another expert witness.
If you are granted leave to file your second report, and the two experts do not agree on the value of the property then both expert witnesses could be cross-examined in court. The court will then make a ruling as to the value of the property based on all the evidence given.
If your report arrives at a value within 10% of the value in the single expert’s report, you have a choice about whether or not to use the second report as evidence. At the hearing, your family lawyer will have the opportunity to cross-examine the single expert with the intention to prove to the judge that the single expert made errors in their valuation.
Division of the Matrimonial Asset Pool
Some Frequently Asked Questions
📆 At what date does the court value the assets?
The Family Court looks at the value of the assets and liabilities of the matrimonial pool at the date of the court hearing and not at the date of separation.
🏡 How is matrimonial property divided?
Section 79 of the Family Law Act 1975 (Cth) outlines how matrimonial property is divided in Australia. Despite a common belief, matrimonial property is not always split evenly. The court has the ability to alter the interests of the two parties based on the direct financial contributions and non-financial contributions of each party. They will also consider the family contribution each party made to the marriage and their financial resources. For example, the court will consider if one party spent more time looking after the home and family than the other party.
They will also assess the future requirements and earning capacity of each party. If one party has greater care of children of the marriage and therefore limited earning capacity, the court may award a greater portion of the community property to that party.
The court will weigh up these factors to arrive at a settlement figure.
➗ How are assets usually divided in a divorce?
Matrimonial assets are divided based on the value of any asset after the payment of liabilities such as credit card debt, a mortgage or any other debt.
The Family Court of Australia will also consider the financial contributions of each party and the non-financial contributions. Non-financial contributions include repairs to a property or unpaid work in a shared family business plus contributions to the home as a homemaker and as a parent.
The court will also consider the current circumstances of each of the parties plus their future circumstances. The circumstances include the age and health of each party along with their earning capacity and the duration of the relationship. They will also assess who will have primary care of the children in the future.
After these factors have been considered, the court will arrive at a decision about the division of the assets.
Unlike with child support payments, there is no set formula for dividing the assets.
🏭 How is a business divided in a divorce?
If both parties are involved in the management of a business then the assumption is that they both have a claim to the business’s assets. If one party is not involved then it will still be considered to be an asset of the marriage, however the other party may have a claim to a larger share.
The division of the business will also depend on the business structure.
If you, or the other party trades as a sole trader then in the majority of cases, the party with the skills and training will receive a larger share. This is because sole traders often rely on their own reputation and the business has a greater value to the owner.
If the business operates as a partnership, then one party may elect to buy the other party out, or the two parties will continue to operate the business together. If however the business is divided then it will be done so based on its value and principles of family law.
A limited liability business will be treated much like a partnership. If however there are other shareholders, what happens to the shares and the business as a whole will depend on the company’s structure.
💲 How is equity divided in a divorce?
When you have a mortgage on a property, equity refers to the amount of the property that you own. For example, your mortgage might be $400,000 on a property worth $500,000 so the equity would be $100,000. Equity is normally split 50/50 between the two parties in divorce proceedings.
❓ Do you have to divide assets before divorce?
You do not have to divide assets before you finalise your divorce from your spouse. There is, however a strict time limit of 12 months from the date your Divorce Order was made, in which you can apply to the Family Court of Australia for a property settlement or financial order.
De facto couples must file an application for property settlement within two years of separation.
💹 Is super included in property settlement?
Under the Family Law Act 1975 (Cth), superannuation may be included in a property settlement.
🔎 Do I have to disclose what’s in my bank and/or superannuation accounts before the property settlement is finalised?
Yes. You have a responsibility to the court and to the other party to give full and honest disclosure of any information that is relevant to the case.
This includes providing bank statements, details of any superannuation accounts, share holdings or tax returns.
You need to disclose this information from the day the property settlement negotiations begin until the day the case is finalised.
If you do not disclose any information, you may be subject to penalties including a costs order (which is where you will need to pay the other party’s costs) or dismissal of the case. In the worst case scenario, you could be found to be in contempt of court, which carries a maximum penalty of 20 penalty units and/or 28 days imprisonment.
👩⚖️ How do I apply for a property or financial order?
There are a series of procedures you need to follow before you apply for a financial order.
The Family Law Rules state that anyone thinking about applying for a financial order must first go through a pre-action procedure which involves the following steps:
- Inviting the other party to attend dispute resolution or negotiations.
- Agreeing on a dispute resolution service and attending the service.
- If the previous steps fail to yield results, you must write a notice of the issues and your future intentions. You must give a clear timeframe in which the other party must reply. The minimum timeframe you can give is 14 days.
- If you are sent a notice of claim you must either reply accepting or declining the offer. If you do not respond, the pre-action procedure is terminated.
- In cases where you cannot reach an agreement, other action can be taken, which may involve filing an application in a court.
Reach out to us for a free consultation
If you have recently divorced your spouse and are thinking about a property settlement, contact our knowledgeable family lawyers. They are experts in their specialty area and can give you tailored advice based on your individual circumstances. We will help you with your negotiations and aim to reach an agreement before a matter goes to court.
Our family lawyers are available for a free consultation on 1300 667 461.