De Facto Break-Up Entitlements
Australia’s Family Law Act treats de facto relationships in much the same way as marriage. Since March 2009, the Family Court has had the power to deal with property and maintenance matters when a de facto relationship breaks down, adjusting the property interests of the ex-partners in the same way as it would for a married couple.
Despite this, many people in de facto relationships are unaware of how money, assets and even superannuation are dealt with in the event of the relationship ending. Many de facto couples assume that by avoiding the formal process of marriage, their relationship proceeds on a ‘what’s mine is mine and what’s yours is yours’ basis… but this is not necessarily the case.
In fact, depending on numerous factors used to assess the nature of a de facto relationship which we’ll outline below, you may be entitled to a share of any asset ‘pool’ created during the years you and your ex-partner were together.
We’ll go into some detail in this article about what you might be entitled to and how such an entitlement is worked out.
Are you in a de facto relationship?
Before you can make any claims regarding property or assets after a break-up, when you’re not married there remains the question as to whether the former relationship actually qualified as ‘de facto’.
Many people are unaware of the legal requirements for a de facto relationship under the Family Law Act. Three factors that strongly support a finding a relationship has de facto status are where a couple has lived together for a period of two years or longer ‘on a genuine domestic basis’; where there is a child or children from the relationship, and; where the relationship is or was registered under a prescribed law of a State or Territory.
After a break-up, it’s not uncommon for one party to deny that the relationship was de facto in nature in order to escape any obligations being placed on them as a result of a property settlement. In this case a Family Law Court will consider a number of factors to make its own determination of the relationship’s status. Importantly, no particular factor listed below is determinative, nor do all of them need to be present for a de facto relationship to be proved. The assessment factors include:
- How long the parties were together;
- whether a sexual relationship existed between the parties;
- the extent and nature of a shared residence;
- to what extent the parties were financially dependent on each other;
- the mutual commitment of the couple to a shared life;
- the reputation of the relationship – did family and friends recognise the parties were in a relationship and did the couple represent themselves to others in this way?
- facts about the ownership, use and acquisition of the parties’ property.
It should be noted that it is also possible for a de facto relationship to exist where:
- One or both parties are still legally married to another person;
- One or both parties are in another de facto relationship;
- The parties are in a committed relationship but don’t live together on a domestic basis.
In considering an application to the court for property settlement by a former party to a de facto relationship, there is a fourth ‘gateway’ factor apart from whether the couple have lived together for a minimum two years, there is a child from the relationship, or that the relationship has been registered under a prescribed law of a State or Territory. This is that the person who makes the application also made substantial contributions to the welfare of the family or to the property, and a failure by the court to make an order or declaration would result in serious injustice to the applicant.
It should be noted that a child produced from the relationship, or substantial contributions made during the relationship, can both constitute an exception to the requirement that the couple have lived together on a genuine domestic basis for two years.
Case example: In the 2013 Family Court case of Lee & Hutton  FamCA 745, a relationship which fell short of two years by 16 days, and in which two planned pregnancies were sadly unsuccessful, was nevertheless considered by the court because the applicant Ms Lee had made a substantial contribution to the welfare of the family as a result of the pregnancies and her role as “an intended parent”.
Ultimately, the judge referred the case for further directions which would include a direction that the parties proceed to mediation or another form of dispute resolution in order to resolve the property dispute.
Case example: In the 2016 Family Court case of Martens v Bocca, a de facto relationship was found to exist between the parties despite the fact they did not live together. A number of factors were assessed by the court as proving the existence of a de facto relationship, including the fact the parties spent one or two nights per week at the other’s home and travelled on holidays to Europe and Asia together; a large number of text messages and emails containing highly sexualised comments and photos that suggested a sexual relationship existed; evidence that a joint bank account had been opened and that the applicant was a trustee and member of the respondent’s superannuation fund; evidence the applicant provided some assistance in furnishing, maintaining, and renovating the respondent’s properties; evidence the parties discussed buying a property together; evidence of a significant number of emails and text messages where intimacy and affection was expressed between the parties; the fact the respondent provided for the applicant in his will; and evidence that showed the parties frequently attended family events together.
This article explains in more detail what is a de facto relationship?
What can you claim from the relationship?
What is the extent of the property and assets a party can claim a share of when their de facto relationship ends? You may be entitled to a share of the contributions made by you and your ex before or during the relationship, as well as accounting for your future needs.
These can be quite extensive and include all assets and debts held in joint or separate names before, during or even after the end of the relationship. The values of assets are taken into account at the time of property division, not at the time of separation.
Property assets commonly discussed in a settlement between former de facto partners will include the home they lived in; cars, boats, bikes and other vehicles; household and personal items, such as furniture, white goods and jewellery. Other assets and debts that could become part of the asset pool include investments in business and property; superannuation; mortgage debt; and money owing on credit cards or personal loans.
While one de facto partner may be able to claim some of the ex-partner’s super when they split up, superannuation differs from other types of property because the funds are held in a trust and different rules apply in order to access the money. This means that a successful claim on some of an ex-partner’s super may not result in a sudden access to cash but instead, entitlement to an amount at a later time under the terms of the trust fund.
Superannuation can be split either by an order of the Family Court or a superannuation agreement (a financial agreement that deals with a superannuation interest). If there is a payment splitting agreement or order operating on a superannuation interest, the law may permit the creation of a new interest for the non-member ex-spouse. It may also permit a transfer or roll-out of benefits for the non-member ex-spouse to another fund.
How are entitlements in a property settlement worked out?
All assets and liabilities of the parties – whether acquired prior or during the relationship, or post-separation, and whether sole or jointly owned, including superannuation interests – first need to be identified and valued.
Once assets and debts from the de facto relationship are established, there is an assessment about how the parties have contributed to the asset pool, including:
- Direct and indirect financial contributions (salary, initial financial contribution, inheritance, gifts, etc.);
- non-financial contributions (renovating the house, working in a business, etc.); and
- whether one party was a primary carer and homemaker for children from the relationship.
The future needs of each party are also taken into account in working out whether an adjustment needs to be made in favour of one party over the other.
This process involves asking a further series of questions, including:
- What each party owned when they first started living together;
- the method by which the parties bought property when they were together;
- how the parties paid for expenses of the relationship;
- the length of the relationship.
The contribution of each party is generally expressed as a percentage. Contrary to a popular perception that a split between de facto partners results in a 50:50 split of ‘everything’, this is not the case. The factors above are taken into account but further questions are also asked, such as which partner cared for any children of the relationship who were under the age of 18; each party’s income, and; the age and health of each party.
A 50:50 split is unlikely, for instance, where one party brought the majority of assets into the relationship and there are no children from the union. An even split is more likely where both parties acquired their assets jointly, earn similar incomes and have no children, or where one party brought more financial assets to the relationship but the other party does most of the childcare and homemaking.
An assessment of these factors may result in the percentage contribution of each party to the relationship changing, affecting the division of assets. The party who has a higher future need – such as primary care of children from the relationship – will generally receive an adjustment in their favour from the asset pool.
If the relationship’s high income-earning party contributed 55% of the purchase price of the home in which the couple lived, for example, and the lower income-earning partner contributed the other 45%, an adjustment based on assessing the other contributing factors (childcare, etc.) above may result in a percentage division of 55% in favour of the lower income-earning partner and 45% for the other partner.
Finally, but importantly, the Family Court will assess any division of property from a de facto relationship – including assets, liabilities, super and financial resources – on the basis of whether the settlement as a whole is ‘just and equitable’ to both parties.
Settling the issue of entitlement to property and assets between former de facto partnerships can be complicated, from proving the status of the relationship to ascertaining the asset pool and working out the adjustments depending on factors such as your age, income, status and future needs.
An additional complication, at a time when you may be psychologically traumatised by the end of the relationship, is the time limits that apply in order to protect your entitlements.
Under section 44 of the Family Law Act, former de facto couples have two years after the end of the relationship to finalise their de facto property and/or spousal maintenance issues. Failure to lodge an application within this time frame may result in a party being barred from seeking orders about property division from the Family Law Courts unless the court grants permission to file an application outside of time. An exception to this time limit may be considered by the court if:
- Hardship would be caused to the party, or a child if leave were not granted, or;
- if the application is for maintenance, that, at the end of the standard two year application period, the person is unable to support themselves without an income tested pension, allowance or benefit.
Satisfying the time limit can often be complicated by disagreement between the parties about when the relationship started – was it when they moved in together? What about if they lived together before a relationship commenced? The guidance of a legal professional with expertise in family law matters is advised in dealing with these complexities and meeting the time limit in order to be able to claim entitlements from the former relationship.
The place of Binding Financial Agreements
The fact the Family Court can make orders dividing property and assets after a de facto relationship breaks down has motivated many people to enter into a legally enforceable Binding Financial Agreement (BFA) either before, during, or even after their relationship.
A BFA is usually prepared by a solicitor and provides detail on how property and assets will be divided if your de facto relationship ends. Parties can agree to regulate their rights, obligations and entitlements via a BFA. In marriages, these are colloquially known as ‘prenups’. BFAs must meet the requirements of the Family Law Act, providing each party with a measure of control over their assets in the event of relationship break-down.
BFAs are commonly used in de facto relationships where:
* There is a significant age difference between the parties;
* there are significant differences between the financial positions of the parties, including their income-earning capacity;
* the substantial basis for the financial maintenance of the parties are investments, for example, in property, trusts, companies, shares;
* one party has or is likely to receive an inheritance;
* there is a significant superannuation amount, compared with the other assets available for division between the parties.
In order for a BFA to be legally binding on the parties, under the Family Law Act the agreement must:
* Have been signed by both parties;
* see both parties obtain independent legal advice prior to entering the agreement.
A BFA can be set aside with the consent of both parties only if they include a provision to that effect in another Financial Agreement entered into between them, or by making a written Termination Agreement ending the BFA.
A BFA is not subject to approval by the Family Court but in certain limited circumstances, the Court can set it aside in accordance with the requirements of the Family Law Act. To do so, the Court must be satisfied that:
* the BFA was obtained by fraud, or;
* a party to the BFA entered into the agreement for the purpose of defrauding or defeating a creditor or creditors of the parties; or with reckless disregard of the interests of a creditor or creditors of the parties; or for the purpose of defrauding another person who is a party to a de facto relationship; or with reckless disregard for the interests of that other person, or;
* circumstances arising since the BFA was made make it impractical for the agreement in whole or part to be carried out, or;
* since the making of the BFA, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child) and, as a result of the change, the child or the applicant with care and responsibility for the child and a party to the BFA, will suffer hardship if the court does not set aside the Agreement; or
* in respect of the making of the BFA a party to it engaged in conduct that was in all the circumstances unconscionable.
If a BFA is set aside by the court, each party may still apply to the court for property division and/or spousal maintenance orders.
The dispute resolution method of mediation is one way in which a BFA may be achieved after a de facto couple separates. Mediation is cheaper, quicker and generally a more accessible and less stressful process than a Family Law Court case. With the help of a trained, neutral mediator, both parties can undertake a similar process to that taken by the court in working out each parties’ assets and liabilities, contributions to the relationship, and future needs, in order to work out a fair settlement dividing their property.
Mediation empowers the parties to reach their own solution, rather than rely on the court. It favours a co-operative, collaborative approach, rather than the adversarial method used in court so that both parties can reach a resolution they can both live with.
Any agreement about entitlements made through mediation can form the basis of a BFA or be passed to the Family Court to be formalised as binding and legally enforceable in the form of Consent Orders.
If you are considering mediation, we highly recommend you contact Mediations Australia.
Seek legal advice
Once a de facto couple decides to go their separate ways, there are many factors to be considered in dividing up property. While in many respects the couple are treated by the law the same as married people, as the information above shows there are also some key differences. Key among these is proving that your relationship qualifies for de facto status.
Discussing your de facto separation with a specialist in family law matters is a sensible path forward. A practitioner with experience in property settlement can help you through all stages of the process, including gathering documentation and other evidence to help prove your relationship was de facto, as well as which assets and liabilities each party brought to the relationship.
Because time limits apply, a de facto couple should not let their affairs drift once they separate. Finalising their affairs in terms of property and assets allows each party to move forward with their life.