Do big earners pay more in Australian divorces?

It is not an uncommon scenario where one party to a marriage, often the Wife, dedicates themselves predominantly to parenting and homemaking duties while the other party develops and advances their career. In circumstances such as this, the party who has developed their career often ends up with a far superior income and earning capacity than the party whose contributions to the marriage have been comparatively non-financial.

The Family Court is often required to use its discretion to determine whether big earners should pay more to financially weaker parties by way of property settlement upon separation.

In 2007, the Family Court heard proceedings between a Melbourne couple who had separated after almost 20 years of marriage. [1]  The couple had four children, with three still at school at the time of trial. The husband was a managing partner of a professional partnership and earned over $500,000.00 per year. In comparison, the wife had been out of work for most of the marriage due to her commitment to the children.

The total asset pool in this case was calculated to be $694,263.00 and 98% of this was allocated to the wife. This was in direct recognition of the husband’s superior earning capacity and the wife’s limited employability due to her dedication to the children. In 2015, the Family Court heard proceedings between a separating Sydney couple who had been married for 11 years and lived together for 13 years.[2] The parties had four children aged between 9 and 15 years at the time of the trial.

The critical issue in this case was the husband’s post-separation contributions. The husband had always enjoyed a high income but it increased markedly post-separation. The husband earned approximately $9,000,000.00 in income in the four years between separation and trial date.

The trial judge acknowledged the fact that the parties “conducted their relationship on the basis that the husband would pursue his career and the wife would be the homemaker and primary carer of the children”. The trial judge ordered that the husband’s post-separation earnings were to be included in the parties’ asset pool for division.

While the husband was a high income earner, the wife had been out of the workforce for some time and would need significant retraining to find gainful employment. The wife was also to have primary care of the parties’ four children. The court made an adjustment in favour of the wife to the effect that she would retain 60% of the asset pool, which the court found was valued at over $7.1 million.

In these cases, the court has recognised the need for significant adjustment to the party left with an impaired earning capacity due to the circumstances of the marriage, especially when the other party is a high income earner.

The 2015 case also demonstrates the importance of finalising property settlements as soon as possible after separation to avoid post-separation earnings being added to the asset pool and subject to division.

Spousal maintenance is also an important issue in cases where one party to the separation is in a financially stronger position than the other party. The weaker party in such circumstances may apply to the court for orders that the high earning party pay them spousal maintenance so that they might maintain the standard of living they were accustomed to during the relationship.

If you need advice on a property settlement or an application for spousal maintenance, please contact Rowan Skinner & Associates Lawyers for assistance.

[1] Gollings & Scott [2007] FamCA 397

[2] Trask & Westlake [2015] FamCAFC 160