How are assets divided after a separation?

A separating couple will often arrange the way in which their assets, finances and liabilities will be divided.

One part of the property settlement process is the evaluation of the couple’s ‘property pool’.

The way in which the Federal Circuit and Family Court categorises these assets can significantly impact the splitting of assets.

To determine the splitting of assets, the court considers factors such as each party’s contribution to the property pool and their future needs, and whether the outcome is just and equitable.

Property vs financial resources

What is property?

Section 4 of the Family Law Act 1975 defines property. It says:

“Property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.”

If the court categorises something as property, it is included in the property pool available for division between the parties.

What is a financial resource?

Unlike property, what constitutes a financial resource is not specifically defined in the Family Law Act and is a fairly broad concept.

Typically, a financial resource is something which is not considered to be property to be included in the asset pool. It is however to be taken into consideration by the court as it offers future financial benefit to one party.

The key difference between a financial resource and property is that a financial resource has the potential to generate future income or assets, while property does not.

A financial resource is an asset that can be used for the purpose of generating income. It is something from which a person can draw financial or monetary resources. A court may also consider other items a financial resource.

How does this affect property settlements?

When dealing with the division of assets after separation, your lawyer may want to classify some items as property and others as financial resources.

The reason for this is if an item is classified as property, it can be divided between the parties, whereas if it is classified as a financial resource, it cannot be divided.

The court may decide that a just and equitable outcome requires that one party receive a greater share of financial resources, based on each party’s contribution to the property pool and their future needs.

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