Separation can be a confusing time with many aspects of your life up in the air. With any separation comes the uncertainty of where your life is headed and how your circumstances will change as a result of your separation. Common questions you may ask yourself are ‘when can I see my children’, ‘where am I going to live’ and ‘who’s going to pay the bills’.

One aspect that is often overlooked during this time is which of your assets will be the subject of the division of your property, and what assets are actually defined under the Family Law Act 1975 (Cth) as ‘property’.  Not all ‘assets’ are treated as ‘property’ in the event of a separation. Big ticket items such as the family home, cars and cash savings may be obvious – but what about the distribution from a trust? A prospective inheritance? Workers compensation for loss of future earnings? We list below what items may actually be subject to a Family Law claim in the event of a separation.

What is property?

The term ‘property’ is defined in section 4 of the Family Law Act to mean ‘property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion’.

The definition is considerably broad and has been interpreted very widely to include both real and personal property. It can include almost anything of value such as:

1. Real property (owned either jointly or individually);
2. Business interests,
3. Trust interests,
4. Jewellery,
5. Cars,
6. Shares,
7. Assets acquired through inheritance,
8. Insurance policies,
9. Cash savings, and
10. Animals.

The Family Law Act looks beyond the legal title of assets and ultimately looks towards who is the beneficiary of the property. For example, if real estate is held on title by one party, it may be considered that the other party’s share is held on trust for them. This means that rather than your entitlement being based on who legally owns the property, it is rather based on your contributions to the relationship and other factors relating to your future needs.

Liabilities of parties are also subject to division in a property settlement and are incorporated in the total ‘asset pool’.  The total value of assets less the liabilities of the parties ultimately provides the net asset pool. It is important for all of the parties’ property (whether an asset or liability) to be assessed during a property settlement as the overall aim of any property settlement is to bring the parties’ financial relationship to an end.

Similar to assets, liabilities are included whether they are held jointly or individually. Again, the definition is broad-reaching and includes almost all debts such as:

1. Mortgages,
2. Personal loans,
3. Credit card debts,
4. Tax debts, and
5. Stamp duty obligations.

What is not classified as property?

While the definition of property is broad, there are a number of things that, while they may be considered assets, are not considered property for the purposes of the Family Law Act.

Examples of such items include:

1. Business goodwill,
2. Non-transferable licences,
3. Unassignable rights or interests,
4. An anticipated inheritance from someone who is still alive,
5. A pending claim for damages for personal injury,
6. Borrowing capacity,
7. Long service leave entitlements,
8. Future pension entitlements,
9. Tax losses, and
10. Overseas superannuation.

These sorts of assets are often considered ‘financial resources’, rather than property. Financial resources are things which do not presently hold a monetary value, but will have the ability to generate an income in the future.

While financial resources are not considered part of the asset pool, the Court can still take these into account when considering each of the parties’ future needs, as they are resources that one party may be able to draw on in the future to assist them financially, which the other party does not necessarily have.

How is the property valued?

Once the property is identified, a value must be attributed to each item to be able to assess the overall asset pool. For larger items of the property pool, such as real estate and businesses, sworn valuations can be obtained from independent, expert valuers. These valuations are often only valid for a period of three months and as such are generally only required to be obtained in the absence of an agreement between the parties to further negotiations.

For smaller assets, such as household contents and various other chattels, it is unrealistic to itemise and value all items. While substantial funds may have been expended towards the items, generally they hold nominal value in the scheme of the overall asset pool and are considered to be worth only what they could be sold for at a second-hand rate. Pets are generally considered in the same vein as while they may hold significant sentimental value, they often hold significantly less monetary value. For more information on who keeps the family pet in a divorce, see our article here.

Superannuation

Superannuation is also considered as ‘property’ under the Family Law Act although is often considered separately to the non-superannuation assets of the parties. This is generally due to the fact that most people are unable to access their superannuation at the time of separation, so it is a unique asset in that respect and as such there are special regulations to deal with it under the Family Law Act.

It is common in long marriages for superannuation to be equalised between the parties. In such circumstances, there is a superannuation split payment from one party’s superannuation which is rolled over to the non-member’s fund. Every situation is unique, however, and we recommend that you obtain legal advice for your own individual situation.

Need assistance?

Should you like to know more about how your assets will be divided following separation, our accredited specialist family law team would be pleased to assist you. You can contact them on 1300 205 506 or via email at family@sharrockpitman.com.au to arrange an appointment for advice on your entitlements in any property settlement.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

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