In family law, property settlements are designed to divide property fairly, but this can lead to misunderstandings about what happens to property owned before marriage in Australia. One common misconception is how property owned before the relationship is assessed under the Family Law Act.
Following separation, the Court will consider the individual circumstances of each party, including contributions made by the other party during the relationship. A family lawyer can help clarify how the Court may approach your specific situation and what to expect when dividing property that was brought into a marriage.
Key takeaways
Marital property in family law
The Court, under Australian family law, considers all pre-marital assets and liabilities belonging to both partners when organising a property division. This includes any assets brought into the marriage and, in some cases, property acquired after separation.
The Court’s role is to assess the full financial picture before determining a fair division. However, pre-marital assets can make a significant difference in how a family law property settlement ends up, especially when supported by clear evidence and legal guidance.
Organising a property order
The Family Court puts all property orders through a four-step process to ensure a fair outcome. As part of this process, the Court considers all assets and liabilities, including any pre-marital asset brought into the relationship.
Valuing matrimonial property
The Court must accurately value the net asset pool, taking into account the individual circumstances of the parties. This requires both former spouses to fully disclose their financial resources, including assets and liabilities brought into the marriage.
The legal title of each asset, as well as any interest held by the other party, will also be considered. A family lawyer can assist in ensuring proper disclosure and representation throughout this process.
Marital contributions
Each spouse’s contributions to the marriage are considered in the property division process. This includes both financial and non-financial contributions. For example, one partner may have provided an income, while the other maintained the home and was the primary carer of the children.
Upon separation, all pre-marital assets owned prior to the marriage are vital and valued considerations under the Family Law Act, which recognises their significance when determining the terms of any agreement reached between the parties.
Future needs
It’s rarely the case that both spouses will have an equal capacity to provide for themselves after a marriage ends. For this reason, the Court typically within 6 to 12 or even 24 months after separation, will assess each party’s future needs.
This assessment is especially important for separated couples aged 19 to 34 or families with young children, as earning capacity, health concerns, and parental responsibilities can significantly differ. Australian family law recognises that changes in circumstances following the end of a married relationship must be considered carefully to ensure a just and equitable outcome.
Fairness
The final step is to determine whether the proposed property order provides a just and equitable outcome. If the court believes that one party hasn’t been provided for adequately, it may make adjustments to decisions made in previous steps.
What about pre-marital property?
What happens to property owned before marriage in Australia can potentially have a major impact on a property settlement. It’s considered separate property from other marital assets. The primary way that property owned influences a property settlement is through its status.
Initial contribution
Any assets or liabilities brought into a marriage by either partner are called initial contributions. For example, a stock portfolio or a house owned by one party prior to marriage would count as a direct financial resource to the matrimonial property.
The significance and value of these depend on several factors, including the circumstances of the divorce or separation, whether the parties have children, and the terms of any agreement reached between them.
Percentage of the asset pool
The initial assets of one spouse may account for a large proportion of the other property divided in a settlement. This could result in that spouse having a greater claim in the settlement. However, if the percentage of pre-marital assets is diluted by future purchases during the marriage, their significance will be reduced.
Length of the relationship
The length of a marriage or de facto relationship is one of the biggest determinants of the importance of initial assets, including direct financial contributions.
In shorter relationships, these initial assets are typically magnified, as there is less time for the family lawyer to demonstrate how the circumstances of the relationship itself have influenced joint contributions. Understanding the specific time limits for reaching an agreement about property settlement is crucial, particularly when evaluating assets owned by each party prior to the relationship.
Initial contributions tend to decrease in importance the longer a relationship lasts. This is for a few reasons. As a marriage progresses, the amount of assets purchased as part of the relationship will account for more of the asset pool. Joint assets can reflect financial contributions from both spouses.
Over the course of a long relationship, non-financial contributions will have more relevance to the settlement. Let’s take a property owned before marriage as an example. While a house is a major initial assets, the spouses will typically make additional contributions as time goes on, especially if they have children.
The other party may contribute through renovation work, maintenance activities, or caretaking responsibilities. In the event of separation, these contributions can significantly impact the final agreement reached under the Family Law Act, as Australian family law aims for a just and equitable outcome for both parties.
Case study: Jabour & Jabour
The case of Jabour & Jabour provides interesting insights. It shows how initial contributions can increase the complexity of a property settlement.
Facts of the case
In Jabour & Jabour, the husband had partial ownership of three separate parcels of land before getting married. Eleven years into the marriage, he sold his interest in two of the properties to get full legal title of the third. Originally used as farmland, the property was rezoned for residential development. This rezoning significantly increased the land’s value, and it was sold for a large profit.
At the time of the divorce, the property owned constituted 90% of the marital pool outside of superannuation interests. The judge in the original case found that each spouse had made equal contributions. However, the husband received two-thirds of the property pool since his initial assets of land made up a majority of the pool.
Appeal
The wife appealed the decision, which was accepted by the Family Court. The original decision was overturned. The judge was found to have overestimated the husband’s initial assets. This was because the increase in value occurred during the marriage. The spouses mutually decided to gain sole ownership of the rezoned property from the proceeds of selling the other two parcels of land.
Also, the joint decision to not sell the rezoned property owned prematurely allowed them to enjoy the full benefits of the increased value. This convinced the Family Court decide to reduce the husband’s entitlement to 53% of the asset pool.
From our clients
I can’t thank Luke Shanahan from Shanahan Law enough. He assisted me in negotiating my way through a messy, aggressive financial/divorce settlement. Can’t sing his praises enough. A truly focused professional possessing a moral compass. I trusted him to rectify my situation quickly and that’s exactly what he did with the greatest eloquence and some fine negotiating skills allowing me to walk away with my head held high and a smile on my face. If you are struggling to finalise divorce proceedings or a financial settlement, Luke is your man most definitely. He's your all round solicitor for life.
- Chris Austin
Property settlements often include a lot of fine details. The relative importance of each party’s contributions and future needs is consequential for their financial welfare. Our team ensures that every client knows what their entitlements are and will fight to get the best possible outcome.
Every property settlement is treated differently. You need a family lawyer who understands what your goals are and can navigate difficult cases and complex negotiations. We’ll help you secure your rights to premarital assets and ensure they are properly acknowledged.
Conclusion
When parties separate, property matters are a crucial part of a client’s ability to move on with their lives. The process of reaching a settlement can involve complex considerations of each ex-partner’s financial and non-financial contributions.
Pre-marital assets, such as a house bought before the relationship, can be treated differently depending on the legal title and other relevant factors. Circumstances like the length of the relationship, child care responsibilities, and both direct and indirect contributions of the parties influence how initial contributions are assessed.
Following a married change in status, the court, will examine the overall situation to ensure a fair outcome about what happens to property owned before marriage in Australia. A family lawyer can help clarify how your family circumstances and property are likely to be treated under the law.
If you’re working out a property settlement with your former partner, we can help. Our team is here to assist with financial concerns or any other family law matter. Contact us today.
