Should property be split 50/50 in Australian divorces?

The Australian Law Reform Commission recently published its Review of the Family Law System and made recommendations to simplify and clarify provisions dealing with property settlements under Australian legislation.

In New Zealand, the Family Court usually orders that joint property of a separating couple is shared 50/50 between the parties.[1] Such orders are made on the assumption that each partner has made an equal contribution to the relationship. There are exceptions to this assumption where the court considers that there are “extraordinary circumstances” that would make the equal sharing of property “repugnant to justice”.

In the United States, there are nine ‘community property’ states where assets acquired during a relationship will be split equally if the parties to the relationship are unable to come to an alternative agreement.

In Australia, there is no such formula used to divide the property of a separating couple. The starting point is that each party to the relationship retains what is legally theirs. The Court has the power to alter property interests if it is satisfied that it is ‘just and equitable’ and legislation sets out the general principles that it must consider as follows:

• Work out the assets and debts of the relationship and their value;
• Look at the direct financial contributions by each party to the relationship (eg. salaries and wages);
• Look at the indirect financial contributions by each party to the relationship (eg. gifts and inheritances from family members);
• Look at the non-financial contributions by each party to the relationship (eg. care of children and homemaking); and
• Look at the future needs of each party based on factors such as age, health, financial resources, earning capacity, care of children and associated costs, etc.[2]

A recent study found that Mothers received, on average, 57% of the asset pool and that this figure was determined by factors such as the size of the asset pool, any history of family violence and care-time arrangements for children.[3] The study also found that only 62% of parties who finalised their property arrangements under the current system thought it was fair.

There has been long running debate in Australia about whether this discretionary system should be retained or if a more prescriptive or formulaic approach might be more appropriate.

Many of the submissions received by the ALRC in preparation of their discussion paper argued that the Australian Government ought to consider introducing presumptions about splitting property, as is the norm in New Zealand and some states in the United States. Other submissions supported the current system as it allows the specific circumstances of each individual family to be taken into account.

The ALRC did not consider that there was enough justification to shift from the current approach to a more prescriptive or formulaic one.

The ALRC did suggest that the drafting of the property provisions in the Family Law Act could be improved, particularly by setting out the analytical steps for arriving at property division “in a more logical order”. The ALRC suggested that the usability of the property provisions in the Act needs improvement and recommended that further research be conducted to properly inform these policy discussions.

If you need advice on a property settlement, please contact Rowan Skinner & Associates Lawyers for assistance. We are LIV accredited family lawyers in Melbourne.

In addition, feel free to check our latest blog about what is the real cost of a divorce for more information.

[1] Property (Relationships) Act 1976 (NZ)

[2] Family Law Act 1975 (Cth) Part VIII.

[3] Rae Kaspiew and Lixia Qu, ‘Property Division After Separation: Recent Research Evidence’ (2016) 30(3) Australian Journal of Family Law 1.