What rules apply to the division of property?

The Property (Relationships) Act 1976 sets out the formula for how property is to be divided. The Act classifies property as either 'relationship property' or 'separate property'. The classification is vital in deciding whether property is shared and in what proportions.

Generally where couples have been living together for three years or more, all property acquired during their relationship will be deemed 'relationship property' and divided equally.

Relationship property includes:

• the home (whenever acquired)
• the family chattels (whenever acquired)
• common or jointly owned property
• property purchased in contemplation of the relationship for the use or benefit of the family
• income earned or assets acquired during the relationship

Separate property includes:

• property owned prior to the relationship, unless it can be shown that the property has been used jointly or 'intermingled' with other property. 

• an inheritance of gifts, unless they have become intermingled or are used for the 'common use and benefit' of the family, or any assets acquired from the inheritance are placed in joint names.

Are there exceptions to equal sharing?
There are three exceptions to the equal sharing principle:

Extraordinary circumstances: If there are 'extraordinary circumstances' rendering equal sharing 'repugnant to justice’ the Courts will make an exception to the equal sharing principle. This exception is difficult to prove as the Court has interpreted this provision stringently.

Short relationships: If the parties' marriage is less than three years (including any de facto period) the individual contributions of each party to the relationship are compared and the assets will be divided in accordance with their contributions. The Act does not apply to de facto relationships of less than three years unless the Court is satisfied that there is a child of the relationship, or the applicant has made a substantial contribution to the relationship, and failure to make an order in either of these cases would result in serious injustice.

Economic disparity: The Act seeks to address the issue of economic disadvantage suffered by a non-career partner when a relationship breaks down. The Court looks at the relative earning capacity of each party and whether any disparity is due to the roles each party assumed in the relationship. An example of this would be where one goes out to work and the other looks after the children and forgoes job opportunities.

Can you avoid equal sharing?
Couples can make their own rules about the ownership of their property. They can decide how they want to divide their property instead of being bound by the rules in the Act. This is known as 'contracting out'. Both married and de facto couples can enter into contracting out agreements setting out who owns the property and how the property is to be divided should the relationship come to an end.

What can contracting out agreements include?
Contracting out agreements can include all the couple's property, or just one asset. The agreement can set out what assets will be shared and in what percentages. It can also detail what assets are not to be shared and how assets are to be valued if the relationship ends. An agreement can even be made about future property - such as future income or capital gains. A contracting out agreement can be made to apply during the parties' lifetimes and/or after the death of one party or both.

Do I need an agreement?
Agreements are recommended if you fall into one of the following categories:

• It is a second marriage or relationship for one or other partner, particularly where there are children from a previous relationship.
• Where both parties have their own home at the commencement of the relationship.
• In situations where one party has significantly more assets than the other.
• Where parties have separated.
• A couple may also want to make an agreement for tax purposes, creditor protection and estate planning.

To be valid, relationship property agreements must be signed and witnessed and each party must receive advice from their solicitor. The solicitors must certify they have given that advice. This means that the parties involved must have their own solicitor and be independently advised.

Can an agreement be overturned?
An agreement can only be set aside if giving effect to it would cause 'serious injustice' to one of the parties. Only then will the Court interfere and overturn an agreement. Setting aside contracting out agreements is uncommon.

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Last updated: 21 November 2008

The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.