How is Property Settlement Calculated: The 4 Steps

The 4 Steps Courts use to
decide Property Division 

How do Courts work out how to divide the assets, financial resources, debts and liabilities between the parties in a Property Settlement Application?

The Court has set out a four step approach it will follow when making deciding property division. The Court follows these 4 steps in each and every case.

The general principles a Court uses to determine a Property Settlement Application is to:

Step One

Establish the Property Pool:

 



 

  • What Assets & Financial Resources do you have and what is the value of each item;
  • What do you owe and what is the amount owing for each liability.

Step Two

What Contributions have each party made to the Property Pool:

  • The direct financial contributions by each party. This may include wages, pension amounts, lump sum payments, compensation payments, windfalls, gifts, inheritances received, initial assets and money brought into the relationship etc.
  • The non-financial contributions made by each party. Non-financial contributions include things such as, renovation work around the home, making items like curtains, parenting and homemaking.
  • The Contributions made by each party since separation.

Step Three

Consider the future needs of the parties.  The Court will look at a range of things including:

  • Age;
  • State of each of the parties’ health;
  • The property and financial resources of each party;
  • Eligibility for a pension, allowance or benefit;
  • Whether the party has the care or support of children;
  • Commitments of each of the parties that are necessary to enable them to support themselves and a child or another person that they have a duty to maintain;
  • The need to protect a party who wishes to continue that party’s role as a parent.
  • The responsibilities of either party to support any other person;
  • A standard of living that in all the circumstances is reasonable;
  • The effect of any proposed order on the ability of a creditor of a party to recover the creditor’s debt, so far as that effect is relevant.
  • Income, as well as income earning capacity (including the physical and mental capacity of each of them for gainful employment);
  • The financial circumstances of any new de facto relationship;
  • The terms of any Financial Agreement that is binding on the parties;
  • Any child support assessed as payable or which might be assessed as payable in the future;
  • Any fact or circumstance which, the justice of the case requires to be taken into account.

Step Four

The practical effect of the Order the Court proposes:

  • Assess whether what is proposed is “just and equitable”. In broad terms, “just and equitable” means a “fair and equitable” distribution of the assets, liabilities and financial resources. The Court tries to achieve what it considers to be fair.
  • It is under this step that the Court decides who will retain the specific assets, financial resources and liabilities.

 

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