What Assets Are Included in a Property Settlement?

Going through a separation or divorce involves many legal processes, including the division of assets and liabilities. One of the most challenging aspects can be determining what precisely counts as property for division purposes. Handling complex property settlement matters requires a thorough understanding of Australian family law and what assets are included in the settlement pool.

Property settlements apply to married couples, de facto couples (including same-sex relationships) who have lived together on a genuine domestic basis. In this article, we’ll explore what counts as an asset in Australian property settlements, how these assets are valued, and the various options for dividing them.

Key Takeaways

• Property settlements include all assets and liabilities regardless of whose name they’re in, including real estate, cash, investments, superannuation, businesses, and personal items.
• There are strict timeframes for commencing property proceedings: 12 months after divorce finalisation for married couples and 2 years after separation for de facto couples.
• The court follows a four-step process when determining how to divide assets, looking at contributions, future needs, and fairness.
• Superannuation is treated as property in Australian settlements and can be split between parties.
• Expert valuations are often necessary for businesses, real estate, and complex assets.

What Is a Property Settlement?

A property settlement is the legal process of dividing assets and liabilities between separating couples. In Australia, this process is governed by the Family Law Act 1975, which sets out the framework for how property should be divided following the breakdown of a relationship.

Timing is critical when it comes to property settlements. Married couples must file for property settlement within 12 months of their divorce becoming final, while de facto couples (including same-sex couples) have 2 years from the date of separation to commence proceedings.

There are three main ways to formalise a property settlement:

• Consent Orders – a formal agreement approved by the court
• Binding Financial Agreements – private contracts between parties
• Court Orders – judge-determined settlements when parties cannot agree

Types of Assets Included in a Property Settlement

The asset pool in a property settlement encompasses all property owned by either party, regardless of when it was acquired or whose name it’s in. Here’s what’s typically included:

Real Property

All real estate holdings are included in the property pool, such as:

• The family home
• Investment properties
• Holiday homes
• Land

Cash and Bank Accounts

All bank accounts and cash holdings are included, whether they’re:

• Joint accounts
• Individual accounts
• Term deposits
• Cash savings

Superannuation

Under Australian law, superannuation is treated as property in family law proceedings. This includes:

• Accumulation funds
• Self-managed super funds
• Defined benefit funds
• Pensions already being paid

Business Assets

Any business interests held by either party will form part of the asset pool:

• Company structures
• Partnerships
• Trust interests
• Shareholdings
• Sole trader businesses

Personal Property

Valuable personal items are included:

• Vehicles, boats, and motorcycles
• Furniture and household items
• Jewellery and watches
• Art and collectibles

Financial Investments

All investments are part of the property pool:

• Shares and securities
• Managed funds
• Bonds
• Foreign investments

Intangible Assets

Less obvious assets that still hold value:

• Intellectual property rights
• Digital assets (domain names, websites)
• Cryptocurrencies
• Loyalty program points

Debts and Liabilities

The property pool also includes all debts:

• Mortgages
• Personal loans
• Credit card debts
• Tax liabilities
• Business loans

How Assets Are Valued and Classified

Proper valuation of assets is a critical step in the property settlement process. The question of when assets should be valued – at separation or at settlement – can be contentious, particularly in lengthy proceedings where values may change significantly.

Different assets require different valuation methods:

• Real estate: Professional valuations or market appraisals
• Businesses: Business valuations by forensic accountants
• Superannuation: Actuarial valuations for defined benefit funds
• Personal items: Professional appraisals for valuable items

“The accurate valuation of assets is foundational to achieving a fair property settlement. Every dollar matters when working toward an equitable division of the asset pool.” – Forte Family Law

Complex assets like businesses and trust structures often require specialist expertise to value properly. Courts may appoint a single expert or each party may engage their own expert to value contested assets.

How Courts Decide Asset Division

When determining how property should be divided, Australian courts follow a four-step process:

Step 1: Identify and Value the Asset Pool

The court will first identify all assets, liabilities and financial resources of both parties to determine the net asset pool available for division.

Step 2: Assess Contributions

The court then considers the contributions made by each party, including:

• Financial contributions (income, assets brought into the relationship)
• Non-financial contributions (renovations, business development)
• Homemaking and parenting contributions

Step 3: Consider Future Needs

The court assesses factors affecting future financial circumstances:

• Age and health of each party
• Income earning capacity
• Care arrangements for children
• Financial resources

Step 4: Justice and Equity Test

Finally, the court makes a determination that is just and equitable in all the circumstances of the case.

Common Exclusions and Contested Items

While most assets are included in the property pool, some may be treated differently:

Gifts and inheritances may sometimes be excluded or given special weight, particularly if received late in the relationship or after separation.

Pre-existing financial agreements (prenuptial agreements) can exclude certain assets from division if properly executed.

Hidden assets are a common issue in property settlements. When suspected, forensic accountants may be engaged to trace assets through financial records.

Business valuations often lead to disputes, with experts frequently arriving at different values based on different methodologies.

Practical Steps to Prepare for a Property Settlement

Preparation is key to achieving a fair property settlement. Here are some practical steps:

Gather Your Financial Documents

Collect all relevant financial information:

• Bank statements for all accounts
• Superannuation statements
• Tax returns and assessments
• Property valuations
• Loan statements
• Business financial statements

Financial Disclosure

Both parties have a legal obligation to provide full and frank disclosure of their financial circumstances. Formal processes exist to compel disclosure if one party is reluctant to share information.

Expert Reports

Consider whether you need expert reports for:

• Real estate valuations
• Business valuations
• Superannuation splitting

Dispute Resolution

Before heading to court, consider mediation or family dispute resolution to reach an agreement. These processes are typically faster and less expensive than litigation.

Special Considerations for Australian Cases

Australian property settlements have some unique features:

Superannuation Splitting

Australia has specific rules for superannuation splitting in family law matters, allowing retirement benefits to be divided even though they may not be immediately accessible.

Tax Implications

Property settlements can trigger tax consequences, particularly capital gains tax when transferring assets between parties. Proper planning can minimise these impacts.

Bankruptcy Considerations

If one party is bankrupt or facing insolvency, this significantly affects the property settlement process and may bring in additional parties like trustees.

FAQs About Property Settlements

Can Superannuation Be Split on Divorce?

Yes, superannuation can be split in Australia. The court can make orders to split superannuation interests, or parties can include superannuation splitting in consent orders or binding financial agreements.

Are Inheritances Always Excluded?

No, inheritances are not automatically excluded from the property pool. Their treatment depends on factors like timing, how the funds were used, and the size of the inheritance relative to the overall asset pool.

How Are Hidden Assets Found?

Hidden assets may be traced through bank statements, tax returns, company records, and other financial documents. In complex cases, forensic accountants specialise in following money trails to uncover concealed assets.

What Happens If One Party Refuses to Disclose Finances?

The court has powers to compel disclosure, including making orders for production of documents from third parties like banks. Non-compliance can result in penalties, costs orders, or the court making unfavourable inferences against the non-disclosing party.

Final Summary and Next Steps

Understanding what assets are included in your property settlement is the first step toward achieving a fair outcome. Property settlements involve all assets and liabilities regardless of whose name they’re in, and proper valuation is key to ensuring equitable division.

If you’re facing a property settlement, seeking professional legal advice early is advisable. Forte Family Law can help you understand your rights and obligations, guide you through the process, and work toward achieving a fair settlement that protects your financial future.

Remember that every family’s circumstances are unique, and the general information in this article should be supplemented with personalised legal advice relevant to your specific situation.