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The Property (Relationships) Act 1976 provides a formula for dividing property when a marriage or de facto relationship ends.  The Act classifies property as either 'relationship' or 'separate' property.  This classification is vital when it comes to working out whether property will be shared and in what proportions.  Generally when a couple have lived together for three years or more, all property acquired during their relationship together with the family home and chattels are deemed to be relationship property and divided equally.  

What is a de facto relationship?

It is important to establish not only whether a de facto relationship exists, but also precisely when it began and ended.

The Act defines a de facto relationship as a relationship between two people provided that:

  • They are both over the age of 18 years;
  • They live together as a couple; and
  • They are not married to or in a civil union with one another.

In determining whether or not two people live together as a couple, the Court will take into account a number factors which are set out in the Act. The inquiry is fact specific and evidence supporting the facts relied on is required.

What is Relationship Property?

Relationship property includes:  The family home and chattels (whenever or however acquired); Property commonly or jointly owned; Property purchased in contemplation of the relationship for the family's common use and benefit; and all income earned and any assets acquired out of that income.

What is Separate Property?

Separate property includes:  All property owned by either of the partners prior to their relationship commencing (unless it can be shown that the property has been 'intermingled' with other relationship property); an inheritance or gift that has not become intermingled or used for the common benefit of the family or from which other assets have not been acquired in joint names.

In what circumstances may Relationship Property not be divided equally?

There are three exceptions to the principle of equal sharing.  These are:

  • Extraordinary Circumstances - If there are extraordinary circumstances that would render equal sharing 'repugnant to justice' then the Court will make an exception to the principle of equal sharing.  This exception is difficult to establish and Courts interpret it stringently.
  • Relationships of short duration - If a marriage is of less than three years duration the Court will divide relationship property proportionately according to the contributions of each party. When determining the length of a marriage, the Court will take into account the duration of any de facto relationship prior to marriage.
  • De facto Relationships of less than three years - The act does not apply to de facto relationships of less than three years unless there is a child of the relationship or one of the parties has made a substantial contribution to the relationship and failure to make an Order would result in that party suffering serious injustice.

What if one of the parties is economically disadvantaged?

Economic Disparity - The Act attempts to address the economic disadvantage suffered by a non-career earning partner if that partner can establish the disparity has arisen as a result of the roles each partner assumed in the relationship.  An example would be when one partner gives up a career to care for children and forgoes work opportunities to do so.

Can equal sharing be avoided?  

Yes, by entering into a 'contracting out agreement'.  This enables a couple to decide how they wish to divide property without being bound by the provisions of the Act.  A contracting out agreement identifies what property is to be divided and in what proportions as well as setting out what property each partner will retain as their separate property and what the values of the respective property items are.  

Can a Contracting-Out Agreement be set aside?  

An agreement can only be set aside if giving effect to it would cause one of the parties to suffer serious injustice. It is difficult to set aside a contracting out agreement on the basis of serious injustice. A high threshold is imposed and matters such as “pressure” to enter into the agreement, the reasonableness of the terms of the agreement and the parties’ circumstances are given detailed consideration. This is to make it clear that parties should have a greater sense of security in the certainty of their contractual property arrangements.  

 

Please call us if you would like to discuss how the Act applies to your circumstances and whether you need the protection of a contracting-out agreement.

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