There is no requirement to have a formal agreement for the division of property, however, if you fail to enter into a formal arrangement, you never truly divide your assets and you could remain liable to your spouse for years to come. In addition, in order to avoid stamp duty, or capital gains tax, on a transfer of property from both of you to just one of you, you will need a formalised agreement in place.
There are two types of formalised agreements that can be put in place, namely a Binding Financial Agreement or Consent Orders. Both are discussed in more detail below. If you cannot agree on a division of property, then you will have no option but to go to Court.
You are completely free to decide upon any division of property that you desire, such as 50/50 60/40 or 100/0. However, you should be aware that your spouse can challenge any agreement at a later stage on the basis that it has caused significant financial hardship to themselves or a child. You should aim for a fair agreement to prevent this.
During the negotiation stage is it useful to be aware how the Court would divide property, should parties not be able to reach an agreement. Whilst each case should be considered unique, the general steps adopted by the Court are as follows:
- Identify and value the assets and liabilities that you and your spouse hold either individually or together;
- Assess each of your financial contributions to the property held, either by way of purchase, maintenance or improvement;
- Assess each of your non-financial contributions made by either of you to the welfare of the family, including any contribution made as homemaker or caregiver, i.e looking after the home and caring for children; and
- Consider the future needs and resources of each of you, such as age, health, capability of finding gainful employment; income; assets and financial resources; who will be looking after the children; the standard of living that is reasonable for each party; and among other things the duration of the marriage.
You are only able to negotiate if both you and your spouse have disclosed all relevant information to each other, and the Family Law Act requires that you provide full financial disclosure to each other. As such the first step in dividing assets is to provide full financial disclosure to each other.