Section 79 of the Family Law Act 1975 (Cth) and section 90SM of the Family Law Act 1975 (Cth) give the Court powers to alter the property interest of the parties to a marriage or de-facto relationship respectively. Generally, the first in the process of doing a property settlement is determining what property is available to be split. This property is called the “net asset pool”.
The net asset pool consists of all of the assets of the relationship, less its liabilities. In a family law context, an asset is any property of the relationship (whether tangible or intangible) regardless of whose name the property is in, that has value, whereas a liability is a type of debt, financial burden or responsibility of the relationship.
Some of the common assets that form part of matrimonial pool, and are able to be subject to a property split, include:
- The matrimonial home;
- Any investment homes;
- Cash in bank;
- Shares or an interest in businesses or companies; and
- Boats and vehicles.
As discussed above, liabilities are also included within consideration of the net asset pool, and are subtracted from the assets in the pool. Common liabilities which are subject to a property split include:
- Personal loans and credit cards;
- Outstanding debts of the relationship, such as unpaid school fees; and
- Tax liabilities.
The parties to the relationship have a duty to disclose any assets or liabilities in their possession, care or control. In this regard, a Court is able to order the split of matrimonial property, even if it is it in one party’s name solely, or if it has been transferred to a third party. For more information on a party’s duty of disclosure, please refer to our article on the duty of disclosure and the Family Court’s duty of disclosure brochure.
Sometimes, a dispute at law arises about whether certain assets of the relationship should form part of the net asset pool. By way of example, these commonly include:
- Companies or Trusts – The Court has also made decisions in the past where they have made orders binding on companies or trusts, even though they are separate legal entities from the matrimonial parties. The Court, in the past, has dismantled elaborate trust structures, with the view that those trust assets form part of the net asset pool. Sometimes these entities are included and sometimes they aren’t, which is why it is important to get advice from an experienced legal advisor.
- Superannuation in the payment phase or invalidity pensions – In relation to superannuation, there have been Court decisions where a superannuation split has been ordered even in superannuation that is in the payment phase.
- Inheritances, or other windfalls such as lottery winnings or personal injury compensation – In certain circumstances, windfalls such as inheritances, lottery winning and personal injury compensation can form part of the net asset pool.
- Liabilities that are arguably wastage, such as gambling debts – The Court has in the past made decision that exclude certain debts of the relationship from the net asset pool where a party has engaged in wastage of a pool’s assets.
There are generally three other steps for the Court to consider once the net asset pool is ascertained.