A property settlement is an important step in the separation of a de-facto or married couple. A formal property settlement is a legal contract between spouses recording their agreement about the division of shared assets and liabilities. A key factor in calculating a property settlement is the initial contribution each spouse made to the relationship. A property settlement can be formalised by a private financial agreement or by consent orders or judicial court orders. Whether the settlement is assessed by the court or agreed privately between the spouses, rules established by the Family Law Act 1975 (Cth) govern the division of assets.

What is an initial contribution?

The assets each party brings with them at the beginning of a relationship, whether property, cash, or another item of value, is known as their “initial contribution”. There is no set formula in assessing initial contributions: the court takes into account the totality of factors. Initial contributions are assessed according to their monetary value, the percentage this represents of the total property pool, whether the other spouse also made significant contributions, and the length of the relationship.

It is important to identify who contributed which asset, the asset’s nature, and it’s effect on further contributions during the relationship. For example, a spouse might contribute a unit at the start of a long-term relationship. The unit might be worth far more at the end of the relationship than it was at the beginning of the relationship. In that case, greater weight will be attributed to the initial contribution, because the appreciation in value of the unit provided significant benefit during the relationship and it provided a residence for the couple.

Not all initial contributions are tangible assets: spouses can also make non-financial contributions such as household management and child-care.

Length of relationship

The length of the relationship is a deciding factor in assessing initial contributions.

In shorter relationships, each spouse’s initial contributions are particularly important. There are generally fewer jointly acquired assets, and It is easier to identify the original owner of an asset.

Courts view longer term relationships differently, based on the assumption that after a period of time a couple’s assets have merged. Initial contributions are assessed against the totality of contributions made throughout the relationship, including household duties and unpaid child-care. For instance, in a recent decision of the Family Court in Jabour & Jabour, the parties had been married for 20 years, and the husband’s initial contribution included part shares in three parcels of land. By the end of the marriage, both parties owned one whole parcel of land. The trial judge found that the parties made equal contributions but the that land was a major portion of the property pool. The judge found that the husband’s contribution was 66% and the wife’s contribution was 34% of the whole property pool. The Full Court reversed this decision, finding that the husband’s contribution was 53% and the wife’s contribution was 47%. The Full Court emphasised principles relating to the assessment of initial contributions in longer relationships.

An initial contribution must be assessed against the total contributions made by both spouses during the relationship.

Any decisions that are made in relation to the asset (in this case the decision to not to sell the land earlier and the decision to use the proceeds from the sale of two parcels of land to buy the third) are considered major joint contributions.

If an increase in the value of an asset during a relationship or marriage was not through the efforts of either spouse then that increase would be considered a joint contribution.

For longer relationships, the court usually assesses each party’s contribution to the acquisition, maintenance, and preservation of the property pool. For example, if one spouse brings a house as an initial contribution and during the relationship the other spouse has acted to maintain and preserve the house, this minimises the importance of the initial contribution.

Here to Help

Contact us if you have any questions about the impact of initial contributions on property settlements. We can help you to negotiate a property settlement after a relationship breakdown.