On March 1 we passed the first anniversary of the new laws which affect the property rights of de facto couples when a break-up occurs, so it’s timely to present a reminder of the provisions. The changes affected the way property is divided and maintenance is paid in the event of a separation, including the effect of financial agreements and the division of superannuation.
The change has brought de facto couples under the Commonwealth Family Law Act which has applied to married couples since 1975. Before this change, each State had separate and quite different laws covering property and maintenance matters for de facto couples, such as the Property (Relationships) Act 1984 in NSW. Where disputes needing the attention of a court involved both parenting and property issues, de facto couples often had to commence proceedings in two different jurisdictions; a Federal Court to deal with parenting and a State Court to deal with property and maintenance. Now the Family Law Court deals with both issues for de facto as well as for married couples under the same Family Law Act.
To whom does the Family Law Act now apply?
The Family Law Act now applies both to couples who are married and to those in a de facto relationship. Note that same-sex relationships are included within the definition of ‘de facto couple’ in federal laws and that all de facto couples now have the same rights and obligations as married couples regarding maintenance and the distribution of property. Other legal changes throughout 2008 and 2009 put same sex couples in the same position as opposite sex de facto couples regarding taxation, superannuation, social security and aged care.
The term “de facto” is not closely defined. To meet the definition, couples must not be married to each other nor related by family, and must have lived together on a genuine domestic basis. What amounts to a genuine domestic basis will be decided by a court’s assessment of all the circumstances, but an application for a “de facto property settlement” under the new Family Law Act provisions can be made if any one or more of the following conditions apply.
- The de facto relationship lasted for at least two years in total.
- A child has been produced by the de facto couple.
- A partner has made a substantial contribution to the property or finances of the other.
- The relationship was registered under a State or Territory law.
- The partners resided for at least one-third of the relationship in a state to which the new laws apply (currently all Australian states and territories except South Australia and Western Australia).
If there is a dispute about whether two people were in a de facto relationship, the Court will consider matters such as:
- the length of the relationship (a minimum of two years is usually required);
- the living arrangements, including whose name is on a lease, who pays the rent and so on;
- whether a sexual relationship exists;
- the degree of financial interdependence;
- whether property was jointly acquired, used and owned;
- whether the couple had or cared for children together;
- how the relationship was presented in public and
- the degree of mutual commitment to a shared life.
The sex of the partners is not relevant. The new laws explicitly apply equally to de facto couples of the same or opposite sexes. A de facto relationship can also exist even if one of the partners is legally married to another person at the time, so the “mistress” (or the male equivalent) may now have rights that did not exist prior to 1 March 2009 and which may impact on the property rights of a married spouse who is not having an affair. This aspect has not yet been fully tested in court.
Who can apply for a property settlement?
The new laws apply to de facto relationships that broke down on or after 1 March 2009, but earlier breakdowns can be considered if each partner agrees in writing to have the new laws apply. Application must be made to the Family Court in relation to property and maintenance issues within two years of your relationship ending. Applications in relation to children can be made at any time.
How will property be divided?
Before the changes, the outcomes in property settlements often differed widely between de facto and married couples. For example, in NSW only the relative contributions (financial and non-financial) to the assets and liabilities of the relationship were taken into account when deciding on the post-split division. Crucially, the Family Court now also takes into account future needs, so that matters such as the provision of an adequate standard of housing post separation and low future earning capacity will be factored in. The member of the couple who is financially stronger is usually less favourably treated under the changed rules, and often more than 50% of the net asset pool is now awarded to the weaker party.
Consequently, the Family Court will consider these factors.
- The net value of current assets, including houses, investments, boats, caravans and superannuation.
- What each partner owned before the relationship and the contribution each person has made to the upkeep and improvement of any assets brought into the relationship.
- The direct financial contributions (eg wages, or payments for properties or improvements to properties), indirect financial contributions (eg gifts, inheritances or payment of household expenses) and non-financial contributions (eg do-it-yourself renovations, caring for children or domestic tasks) made by each person over the course of the relationship.
- Each person’s future needs, including considerations such as who will have the care of any children, relative earning capacities, and the financial resources available.
Once the court has decided on the split of the assets, it may make orders about how implementation will occur, such as:
- that assets such as the family home will be sold and the proceeds will be divided in a particular manner;
- that title to various assets will be transferred;
- that regular maintenance payments will be made; or
- that superannuation funds will be divided in specified proportions.
Will formal agreements between partners be effective?
The new laws do provide for de facto couples to make “binding financial agreements” about the way they will manage their assets together. This can be done before moving in together, during the relationship or after separation. Legal advice should be sought, because neither party can unilaterally change their mind at a later date and ask for a larger share of the assets. Also, certain formal requirements must be met if the agreement is to be binding, and it is usually a good idea to register agreements with the Family Courts in the form of Consent Orders.
Financial planners who have clients in same or opposite sex de facto relationships who they refer to solicitors for wills, powers of attorney and the like, should put binding financial agreements on the agenda for consideration.
Do the new laws provide recognition of parenthood for same-sex couples?
Many children born to or adopted by same-sex couples will be recognised by the law as children of both parents. This will include:
- children conceived through assisted or artificial methods to lesbian couples;
- children adopted by one or both members of a same-sex couple, as long as both consent; and
- children born under surrogacy arrangements recognised under a state or territory scheme. (NSW does not have such a scheme).
This recognition of legal parenthood applies to child support and parenting matters including decisions such as where the children will live, who they will spend time with, and who will make long-term decisions regarding education, religion and the like.
The Family Court has always heard matters in relation to children no matter what the relationship status was between the parents. Before the amendments same-sex parents could obtain parenting orders if they could demonstrate they were a person concerned with the care, welfare or development of the child but they can now apply to the Court for parenting orders in their own right as a parent. Court decisions continue to be made by considering what parenting arrangements would be in the best interest of the child.
Recognition of same-sex parents in some other matters, such as consent for medical treatment, fall under state laws.
Can the court make orders concerning maintenance and child support?
Either member of a separated de facto couple can make an application for the other party to pay maintenance to them for their financial support. The court will consider the relative financial position of each of the partners, and will make an order for maintenance if:
- applicants cannot adequately support themselves financially due to poor health, having the care of a child of the relationship or similar reasons beyond their control; and
- the former partner of the applicant has the ability to provide financial support.
If a maintenance order is made, it will usually be for a fixed and limited period of time.
From 1 July 2009 child support laws have also applied to same-sex-parents, regardless of whether the children were adopted or born through assisted conception.
If a person’s name appears on the child’s birth certificate, or a court has made a finding, or a statutory declaration of parenthood has been signed, then it is likely that parenthood will have been established with attendant child support obligations. A parent can ask the Family Court for a declaration that child support is payable by their former partner.