De facto property settlement explained

After a de facto relationship ends, oftentimes a property settlement will need to occur. A property settlement is essentially a division of the parties’ assets that will see each of them walk away with a just and equitable outcome.

Some property settlements are amicable and can be resolved between the parties without any need for lawyers to become involved, whereas at the other end of the spectrum, some property settlements need to be resolved by a judge at the end of a lengthy court battle.

In Australia, de facto couples now make up 20% of all relationships, up from 6% in 1986. Many couples are opting away from the traditional need to get married, meaning that de facto couples are only going to rise in numbers.

This article will discuss complex issues about de facto property settlements, including what a de facto relationship is, what a property settlement is, and the important factors to consider.

What is a de facto relationship in Family Law?

A de facto relationship, according to the Family Law Act 1975 (Cth), is a relationship between two adults who are not married nor related by family and are in a genuine domestic relationship insofar. Their relationship can satisfy any number of the following factors:

• duration;
• the nature of the common residence;
• a sexual relationship;
• financial interdependence;
• ownership of property;
• degree of mutual commitment to a shared life;
• children;
• registration of the relationship; and
• the public nature of the relationship.

A widespread misunderstanding is that the relationship must have been ongoing for two years; whilst this is a common determinative factor, it isn’t the sole factor. There is, in fact, no sole determining factor.

How are assets divided in a de facto property settlement?

The simple answer is that assets in a de facto property settlement are divided in the same way as they would be in a marriage.

The primary distinction is jurisdiction; that is, a court cannot make orders in relation to a de facto property settlement without establishing that a de facto relationship existed in the first place. In many circumstances, this is not in dispute between the parties. Sometimes, though, it is and requires a separate determination. This situation differs to a marriage, where jurisdiction is established by virtue of the marriage itself.

Section 79 of the FLA outlines how a property settlement occurs in relation to a marriage. By virtue of essentially identical provisions, section 90SM outlines how a property settlement occurs in relation to a de facto property settlement.

These sections of the Family Law Act reflect the important decision of Stanford & Stanford. that set out the four steps to a property settlement, being:

1. Identifying and valuing the assets, liabilities, superannuation and financial resources.
2. Assessing the contributions of each party to the relationship.
3. Assessing the current and future circumstances of each party to the relationship.
4. Considering whether the outcome is just and equitable.

Every day, decisions of the Court are published which set out how the Family Law Act (FLA) is applied to de facto property settlements.

De facto relationship settlements and superannuation

Similarly to property settlements generally, there is little difference between how superannuation is dealt with for those parties who are in a de facto relationship versus those parties who are married.

For both marriages and de facto relationships, Part VIIIB of the FLA deals with superannuation interests.

Commonly, a suite of orders proposed by one or both parties to a de facto property settlement will include orders relating to a superannuation split. A superannuation split is where funds held within one of the parties’ superannuation account is transferred into a superannuation account in the other parties’ name.

Superannuation is typically included alongside other assets for division, though whether or not it is treated akin to other assets (such as property, cash and shares) or separately in its own pool, is a matter for the parties or for the Court to decide. As discussed above, section 90SM of the FLA is used to consider how superannuation interests should be divided as part of a de facto property settlement, if at all.

A superannuation split is a complex legal process, but one of the essential steps is ensuring that the trustee of the relevant superannuation fund (i.e. the fund from where the money will be leaving) is accorded procedural fairness and given the right to object to the proposed orders. Without this occurring, orders cannot be validly made.

How to commence de facto property settlement proceedings

Commencing de facto property settlement proceedings involve the same steps as commencing marriage property settlement proceedings; that is, a party must follow the ‘pre-action procedures’ within the legislation.

The Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) include, at Schedule 1, those procedures that must be satisfied. These are roughly as follows:

1. Giving the other party a copy of the pre-action procedures.
2. Exchanging financial disclosure documents.
3. Making inquiries about dispute resolution services.
4. Inviting the other party to attend dispute resolution.
5. Issuing to the other party a notice of intention to commence proceedings.
6. Considering the other party’s response to the notice, if any.

Upon commencing proceedings, the applicant party will need to file, among other documents, a ‘Genuine Steps Certificate’ that sets out which of the pre-action procedures they have complied with.

Is there a de facto property settlement time limit?

Yes, there is a de facto property settlement time limit, being 2 years from the end of the de facto relationship. This essentially means that an application must be filed with the Court prior to the time limit expiring; it does not mean that a de facto property settlement needs to be finalised with the Court by this time.

There are exceptions, however, to this time limit:

• where both parties consent to an application being filed; and
• where “hardship would be caused to the party or a child if leave were not granted”.

In relation to the ‘hardship’ exception, extensive case law sets out that an applicant must show that hardship would be caused, and must then persuade the Court to exercise its discretion to grant leave for the application to be heard out of time. The applicant’s case is taken at its highest. The likely costs to be incurred by the parties, versus the potential outcome, are also factored into this discretionary exercise.

Contact Turnbull Hill Lawyers

De facto property settlements can be more complex than matrimonial property settlements, given the stricter time limits and the potential jurisdictional issues. This is not to mention the general complexity of a property settlement in and of itself.

Expert legal advice can help to ensure that time limits are adhered to, the right evidence is filed, and that you have the best possible opportunity to achieve your desired outcome. If you are in a de facto relationship or have just separated and need advice about a property settlement, make an appointment with one of the experts in our Family Law team.