If you’ve recently split from your partner or are simply wondering what might happen if you do, you’ll need to keep your financial wits about you. A division of assets and debts, whether they’re held separately or together, may be on the cards.
Here are some of the things to be aware of when it comes to de facto splits and your finances.
How does the law define a de facto relationship?
A de facto relationship, according to Australian family law, is where two people of the same or opposite sex live together on a genuine domestic basis as a couple. You can’t be married to each other or related by family.
If we break up, do we have to go to court?
Not all de facto couples have to divide property of the relationship (that’s your assets and debts) when they break up. However, depending on your situation, this may be the case and can be formalised between the two of you without any court involvement.
If you can’t agree though, you can apply to a court for financial orders regarding the division of property and possibly superannuation, while spouse maintenance might also be payable in some circumstances.
This must be done within two years of you splitting from your former partner, otherwise, you’ll need special court approval to make an application.
When can orders about the division of property be made?
The family law courts can order a division of any property you and your de facto own (regardless of whether you own it together or separately) if they’re satisfied of one of the following:
- The de facto relationship lasted at least two years
- The two of you had a child
- One party made substantial financial or non-financial contributions and serious injustice would result if the order to split property wasn’t made
- The relationship is or was registered under a prescribed law of a state or territory.
What does ‘property of the relationship’ include?
Property includes all assets and debts held in joint or separate names and may include things you acquired before or even after the relationship ends. This could include things like:
- The family home
- Cars and boats
- Household and personal items, such as furniture, white goods, and jewellery
- Business and property investments
- Home loan debt
- Money owing on credit cards or personal loans.
How is superannuation affected?
Under superannuation splitting laws, if you separate, it’s possible you’ll get some of your ex-partner’s super or that they’ll get some of yours.
However, because super is held in a trust and differs from other types of property, there are rules around when these assets can be accessed.
What this means is, splitting super doesn’t necessarily convert it into cash as it’s still subject to certain rules, which may mean that you mightn’t be able to access the money for a long time.
Other things to think about
- What your financial situation might look like after the separation
- What financial adjustments you may need to make
- Your will and any other instances (for instance, super or insurance) where you may have named your de facto as a beneficiary.
Seek financial advice to help you understand the long-term outcomes of different settlement options. Please reach out to the Sherlock Wealth team to discuss your unique situation here