How does the Court Decide?
Section 79 of the Family Law Act (Cth) gives the Family Court very wide powers to make property orders. This involves:
- determining what property the parties own and its value;
- considering what contributions were made by each party in the past; and
- considering the present and future needs of the parties including their incomes and earning capacities, both actual and potential, the care of any children, and superannuation and other financial resources.
The Court may then order one party to transfer property to the other. It can also order the payment of a lump sum of money instead of property or order that one party repay a debt to a third party.
The Future Needs of the Parties
The Court decides whether more property should be given to the party who has the greatest need in the future. It will look at matters such as:
- the age and health of both parties;
- the ability of each party to support themselves in the future;
- whether either party is supporting another person, such as children or a relative;
- whether a party is being supported by someone else, such as a new partner, parents, and so on.
These matters will also be considered by the Court in deciding whether or not to grant maintenance of the other spouse.
The Court looks at the history of the marriage and determines how much each party has contributed to the acquisition, conservation and improvement of the property. The direct contributions a party makes may include:
- money contributed during the marriage, for example, wages, income from a business or investments;
- property owned at the time of marriage;
- gifts and inheritances;
- work done on the property, for example, building, renovating; and
- efforts put into building up and running a business.
The efforts of the party who worked in the home looking after the children and doing the housekeeping are taken into account as ‘indirect contributions’ to the property. This is because by staying at home, this party has freed the other party to work. Therefore a home-maker can be entitled to a share of the property even though they have not paid any money towards it or have earned no income during the marriage.
In many marriages the indirect contributions of the home-maker equal the direct contributions of the income earner. This may not be the case where the marriage was short or the direct contributions of one party are large (see the examples below).
Contributions may also be negative if one party wasted the resources of the marriage. For example, in the case of Kowaliw & Kowaliw (1981) FLC 91-092, the Court considered that the losses incurred because of the reckless negligence, alcoholism and gambling of one party did not have to be shared by both parties. In Doherty & Doherty (1996) FLC 92-652, the Court considered that the wife’s contribution as home-maker and parent to have been increased and the husband’s contributions diminished because of the husband’s drinking habits and violent and aggressive behaviour toward the wife and children.
Example – Division of Property
The following hypothetical case illustrates how this process works. Many cases will not be as simple as this example and parties will need to get advice from a lawyer who is experienced in family law.
Mr. and Mrs. Smith separated after 12 years of marriage. They did not have much property when they married but they saved enough money out of Mr. Smith’s wages to pay off a house. Mrs. Smith worked in the home during the marriage to look after her husband and their children now aged 6, 8 and 10. The children live with Mrs. Smith and her only income is parenting payment. Mr. Smith does not have any superannuation entitlements.
The Court would probably consider that Mrs. Smith’s indirect contributions as home-maker equalled her husband’s direct contributions and that she is entitled to 50% of the house. However, as she has to look after the children in the future and only has a small income, and little likelihood of ever earning as much money as Mr. Smith, the Court is likely to give her more of the property. It may order that say, 65% property be distributed to Mrs. Smith because she has the care of the three young children and the husband has an ability to earn more money. Mrs. Smith could also receive a greater share of the property to balance Mr. Smith’s superannuation in the event that Mr. Smith did have superannuation entitlements.