Financial Disclosure is essential in property proceedings as it allows both parties to understand the full financial picture and make informed decisions about how to divide their assets and liabilities. This process can be particularly important for women who may have been financially dependent on their spouse during the relationship.
According to data from the Australian Bureau of Statistics, in the 2019-20 financial year, the Family Court of Australia and the Federal Circuit Court of Australia received 20,063 applications for property settlements both married and de facto. Of these, 10,573 applications were resolved by consent orders, which means that the parties reached an agreement without the need for a court hearing saving considerable amounts of legal fees.
To reach a mediated property settlement, financial disclosure is the key and so important as you are basing your financial future on that information provided in settling the proceedings. Failure to provide accurate and complete financial disclosure can result in serious consequences, including the court setting aside any agreements made, imposing penalties, or even criminal charges for perjury.
1. Preparing to Leave
When leaving a relationship, it’s important to take steps to protect your financial interests. Here are some financial documents you should consider securing or taking with you when leaving the family home:
- Personal identification documents – this includes your passport, driver’s license, birth certificate, and Medicare card.
- Bank account information – take copies of bank statements, credit card statements, and any other financial accounts you may have. This will help you understand the current state of your finances and protect against any unauthorized transactions.
- Tax returns – take copies of your previous years’ tax returns. This will provide information about your income, deductions, and any potential tax liabilities.
- Property documents – if you and your partner own property together, make sure to take copies of any mortgage documents, title deeds, and other property-related documents.
- Superannuation information – take copies of statements for any superannuation accounts you may have. This will give you an idea of your retirement savings and help you make informed decisions about future contributions.
- Insurance policies – take copies of your health, car, home, and life insurance policies. This will help you understand the coverage you have and ensure that you’re protected in case of any unexpected events.
2. Financial Disclosure
Financial disclosure involves providing comprehensive information about your financial situation, including your income, assets, and liabilities, to your former partner and the court.
There are several reasons why financial disclosure is so important in the process:
- Transparency – financial disclosure promotes transparency in the property settlement process, ensuring that both parties have access to all relevant financial information. This helps to avoid surprises or hidden assets or debts that may affect the outcome of the settlement.
- Equitable distribution – financial disclosure allows for a fair and equitable distribution of assets and liabilities between the parties. Without accurate and complete financial information, it’s impossible to ensure that each party receives their fair share of the assets and liabilities.
- Settlement negotiations – financial disclosure helps parties to negotiate a settlement that takes into account all of the financial factors relevant to the property settlement. Without financial disclosure, negotiations may be based on incomplete or inaccurate information, leading to an unfair or inappropriate settlement.
- Legal requirements – financial disclosure is a legal requirement in family law property proceedings in Australia. Failure to provide accurate and complete financial information can result in serious consequences, including the court setting aside any agreements made, imposing penalties, or even criminal charges for perjury.
When going through a property settlement, both parties are required to disclose all relevant financial information, including:
- Real estate – this includes any houses, apartments, or land that you own, either individually or jointly with your former partner.
- Vehicles – this includes any cars, boats, motorcycles, or other vehicles that you own, either individually or jointly with your former partner.
- Personal property – this includes any personal belongings, such as furniture, electronics, jewellery, and other valuable items.
- Bank accounts – this includes any bank accounts, including savings accounts, checking accounts, and investment accounts, that you own, either individually or jointly with your former partner.
- Superannuation – this includes any superannuation accounts that you have, either individually or jointly with your former partner.
- Businesses – this includes any businesses that you own, either individually or jointly with your former partner.
- Income – this includes wages, bonuses, rental income, and any other sources of income.
- Liabilities – this includes debts, such as mortgages, credit card debts, and personal loans.
Earlier we outlined the serious consequences, including the court setting aside any agreements made, imposing penalties, or even criminal charges for perjury.
3. The Split
There are a range of factors when determining a property settlement in family law matters. These factors are set out in section 79 of the Family Law Act 1975 and include:
- The financial contributions made by each party to the relationship – this includes income, assets, and liabilities brought into the relationship, as well as any financial contributions made during the relationship, for example:
- Income – this includes any income earned by each party during the relationship, including employment income, investment income, and business income.
- Assets – this includes any assets owned by each party prior to the relationship, as well as any assets acquired during the relationship, such as property, vehicles, or investments.
- Liabilities – this includes any debts or liabilities that each party brings into the relationship, as well as any debts or liabilities incurred during the relationship.
- Gifts or inheritances – this includes any gifts or inheritances received by either party during the relationship.
- Contributions to the acquisition or improvement of property – this includes any contributions made by either party to the acquisition or improvement of property during the relationship, such as paying off a mortgage or funding renovations.
- The non-financial contributions made by each party to the relationship – this includes contributions such as caring for children or homemaking, which may not have a direct financial value.
- The future needs of each party – this includes factors such as age, health, income earning capacity, and financial resources, and considers any disparity between the parties in these areas.
- The length of the relationship – the longer the relationship, the more likely it is that the assets will be divided equally.
- The presence of any children – the court will consider the needs of any children of the relationship, including their age, care arrangements, and financial needs.
- Any existing property orders – the court will take into account any existing property orders made by the parties and will consider whether any changes need to be made to ensure a fair and equitable outcome.
- Any other relevant factors – the court has discretion to consider any other factors that it considers relevant in the circumstances of the case.
It’s important to note that the weight given to each of these factors will depend on the individual circumstances of the case. The mediator/court will take a holistic approach to property settlement, considering all the relevant factors and determining a fair and equitable outcome that takes into account the specific needs of the parties and any children of the relationship.
To calculate the net value of each party’s assets and liabilities, the total value of the assets is subtracted from the total value of the liabilities. This provides the net value, which is then used to determine the percentage split of the property settlement.
While separating is never pleasant you have made a decision about your future. Therefore you need to consider the key factors leading to a Financial Settlement of your relationship as this is also about your future and that of any children in the relationship.
The key consideration is financial disclosure. It’s important to ensure that you provide accurate and complete information to avoid potential legal consequences. If you’re unsure about what you need to disclose or how to read the documents produced, seek legal advice to ensure that you fully understand the process and to ensure a fair and just outcome.
If you need assistance call us on 02 8858 3211 or email [email protected].