The significance of gifts or contributions made by third parties
When determining an application to divide assets and liabilities between separated spouses/de-facto partners, the Federal Circuit and Family Court of Australia (FCFCOA), considers who made the contributions to the acquisition, maintenance and improvement of property.
The FCFCOA also considers the future needs” factors set out in s75(2) of the Family Law Act 1975 (the Act) when deciding whether to make an adjustment to one or both parties’ property ownership.
This article does not deal in detail with the circumstances in which the FCFCOA may make an adjustment based on the parties’ future needs.
What is a Contribution?
The FCFCOA will only make an Order for property division if it is satisfied that, in all the circumstances, it is just and equitable to do so. In determining whether an Order should be made, the FCFCOA looks at the contributions the parties made to the property pool. Contributions can be financial or non-financial and:-
- may be made directly or indirectly by or on behalf of a party to or a child of the marriage/ relationship to the acquisition, conservation or improvement of their property; or.
- made by a party to the marriage/relationship for the welfare of the family (comprising the parties and their children).
The FCFCOA determines what property division should be made on the basis of the contributions made by each party, also taking into account the adjusting factors set out in Section 75(2). However, it is not always a party to or a child of the marriage/relationship who makes contributions.
What about contributions made by someone who is not a party to the marriage or relationship?
Contributions can be made by third parties, most often the parties’ parents. Contributions made by or on behalf of a party to the marriage/relationship are taken into account. Contributions made by a third party must be attributed to one or sometimes both of the parties to the marriage/relationship.
Who gets the “credit” for contributions on behalf of a party can make a big difference to the outcome of property proceedings.
The parties welcome outside contributions when times are good but they become the subject of argument and disagreement when separation occurs and times are bad.
Who can make a contribution and who gets the benefit of that contribution?
The most common example of a contribution made by a third party is a gift from one party’s parents of money or specific property.
How will the court apply the benefit of such contribution?
What was the Intention of the third party when they made the contribution?
The actual intention of the donor may not have been carefully considered at the time the gift was made. In circumstances where a property division is being considered, it is often asserted that what was intended to be a gift was actually a loan which must be repaid.
In determining the weight to be given to a gift to only one party the Court may:
- Allow the recipient of the gift to be credited with the value to which the gift had increased at the date of the hearing; or
- Give the recipient of the gift credit for its initial value; or
- If the gift has been mixed with other contributions over a long period, not attempt to give it a particular value, but rather consider it a fact to be taken into account along with other relevant factors.
Gift to both parties?
Even where the gift by a relative of one party is made to both parties, it is open to the FCFCOA, in certain circumstances, to treat it as a contribution by the party to whom the donor was related. In the marriage of Pices the Court took into account the relationship of the spouse and their parents in concluding that the gift from the parents should be regarded as a contribution by the related spouse. If however the gift was clearly intended to be given to both parties, the Court will regard it as an equal contribution.
Non-financial contributions by a third party
A non-financial contribution may be made by a relative. Provision of childcare or provision of accommodation, are examples of such non-financial contributions that can be made by a parent or relative and can assist one party or the other in property proceedings.
If you are engaged in a property settlement with your spouse/partner and a third party has made a financial or a non-financial contribution to the marriage/relationship, this can lead to a stressful and complex situation. Contact us for assistance and support with your family law property settlement..