When it comes to property settlement, section 79 of the Family Law Act 1975 (“the Act”) requires the Court has to first identify the property available for division. The Court must then consider the “financial resources” available to be considered under section 75(2)(o) of the Act.
It is commonly accepted that property, for Family Court purposes, includes real estate, overseas real estate, bank accounts, share investments, interest in a business or partnership, control of trust assets, vehicles, superannuation entitlements, jewellery, household furnishings and personal chattels.
Property may also include “notional add-backs” for those assets which no longer exist but should be added back into the asset pool on the basis that it was a premature distribution of property. For example, where there is an allegation that one party wasted monies post-separation, the expenditure of those funds is treated as if the party received an advance on their entitlement and added back into the asset pool.
However, the Courts have held that the following items do not constitute property:
1. Business goodwill that is personal and not commercial;
2. Non-transferable licences, unassignable rights or interests;
3. An expectation of receiving an inheritance from someone who is still alive. But see financial resource below;
4. A pending claim for damages for personal injury;
5. A capacity to borrow money.
The Courts have held that while the following items below meet the definition of property, they should be excluded from the asset pool available for division:
1. An inheritance received late in the marriage if other assets allow for a just result. Note that the inheritance would still be taken into account as a “financial resource” available to the party who received the inheritance;
2. An inheritance received after the parties separated. Again, post-separation inheritance would still be taken into account as a “financial resource” available to the party who received the inheritance;
The term “financial resource” is not defined in the Act. A “financial resource” can be thought of as something which is not property included in the asset pool but is a factor for the Court to take into account under section 75(2)(o) of the Act because it has a future financial benefit to one party. The term “financial resource” is quite broad and can include a beneficiary’s interest in a discretionary trust and the ability of a party to raise funds, such as by borrowing. It will basically include resources which have the ability to generate an income. Other examples of a “financial resource” include:
1. Long service leave if likely to be in the form of cash;
2. A future pension entitlement;
3. Tax losses;
4. An anticipated inheritance;
5. Overseas superannuation.
The practical effect is that where you have something which is not property but which may provide a future financial benefit to one party, an argument can be made that it is a “financial resource” which should be taken into account under section 75(2)(o) of the Act. The difference between property and “financial resource” matters because at the end of the day the Court must be satisfied that the proposed Orders are just and equitable, i.e. fair. The operation of section 75(2)(o) of the Act assists the Court in making sure that the Orders are just and equitable by ensuring that financial resources are taken into account.