What is the difference between a Binding Financial Agreement and Consent Orders?
There are only two ways (that are legally binding and recognised at law) that you can settle your property matters, and they are either by consent orders or a binding financial agreement.
Each matter is slightly different in circumstances and you should consult a lawyer to advise you on the advantages and disadvantages of both documents for a property settlement.
- Consent orders are filed in a Court. The Court will only make orders that the parties have agreed upon, if the Court thinks they are “just and equitable” which in essence means fair and reasonable.
- The terms in a binding financial agreement do not have to be fair, and it is possible for one party to have a more advantageous settlement than the other.
- A binding financial agreement is in essence a contract between the parties and does not come under the scrutiny of a Court or any other independent body.
- You can use consent orders to document and cover off your parenting matters at the same time as your financial or property matters. You cannot cover off on parenting matters in a binding financial agreement.
- The parties can do consent orders by themselves and do not need to have a lawyer witness this document.
- For both parties to enter into a binding financial agreement each party must have their own lawyer who will give them independent legal advice and will sign a certificate stating that they have provided that advice to their client.
- Sometimes a binding financial agreement is the better option for parties if they are trying to extinguish future claims for spousal maintenance.
What is a Property Settlement
When you separate from your husband, wife or in some cases defacto spouse it will become necessary to divide up your property and finalise a property settlement. When it comes to a property settlement all of the parties’ current assets, liabilities and financial resources are considered. This will include both parties’ superannuation and pension entitlements.
Basically when you are considering a property settlement the term property considers almost anything and everything of value. These can include:
- Any property held in one name;
- Jointly owned assets;
- Business interests;
- Shares or interests in a company;
- Family trusts as well as other trusts interests;
- Funds or interests over which a party has either control or influence;
- Assets owned prior to the commencement of the relationship or accumulated during the relationship;
- Even assets acquired post-separation.
Interestingly prospective entitlements for example redundancy payments and long service leave may even be included depending on the individual circumstances.
Liabilities are also considered in the same way and they will include both parties’ debts, credit cards, loans, tax and stamp duty obligations and that is irrespective of whether they are in joint names or the name of one party.
The Four Step Process In Deciding Property Division
When looking at a property division the Court has a basic four-step approach it will follow when deciding on property matters:
- Establish the property pool:
(a) What are the assets, financial resources and liabilities of the parties and what is the value of each item;
(b) What contributions have each party made to the property pool;
(c) Direct contributions which may include wages, pension, lump sum payments, compensation payments, windfalls such as gifts and inheritances received. These contributions are further broken down into sections such as contributions at commencement of relationship, contributions during the relationship and contributions post-separation.
- Non-Financial Contributions which also include home duties, parenting, renovation work around the home and any other improvements each party has made to increase the value of a particular piece of property.
- Future needs:
The Court will look at a range of things when considering the future needs of the parties and they include:
(a) The age of the parties;
(b) The state of each party’s health and any existing medical condition;
(c) The property and financial resources of each party;
(d) The parties’ eligibility to receive a pension, allowance or benefit;
(e) Whether the party has to care and support a child or children of the relationship;
(f) Commitments that any of the parties have that are necessary to enable them to support themselves and a child or any other person that they may have a duty to maintain (such as an invalid parent or sibling);
(g) The need to protect a party who wishes to continue in the role of a parent;
(h) The standard of living that in all the circumstances is reasonable for the parties;
(i) The income earning capacity of the parties, and the ability for each of them to maintain employment;
(j) The Court may also consider the financial circumstances of someone when they have re-partnered or entered into a new relationship or marriage;
(k) Any child support assessments as payable or which have been assessed as payable into the future;
(l) Any other fact or circumstance which the justice of the case requires to be taken into consideration by the Court.
- The practical effect of the order that the Court proposes.
Finally the Court will assess whether the proposed consent orders reach the threshold standard of just and equitable. That is, in very broad terms, whether they are fair and reasonable to each party in the way they distribute the assets, liabilities and financial resources of the parties. At all times the Court tries to achieve what it considers to be a fair result.
Yes there are time limits that apply to family law property settlements. You can commence your family law property settlement as quickly or as soon as you wish to after your separation. You don’t need to wait for a certain period of time or to commence divorce proceedings.
A maximum time limit however does apply. For property law settlements under the Family Law Act an application to the Court for a property settlement must be filed within either:
- 1 year of a divorce becoming “absolute” for married couples (a divorce becomes absolute, or final, when the Court issues a certificate of divorce which is usually 1 month and 1 day after the divorce matter has been heard; or
- In the case of defacto couples 2 years after separation.
Can You Still Proceed if the Time Limit has Expired?
If the time limit has expired you can still make an application to the Court and seek “leave to proceed” notwithstanding the fact that the time limit has elapsed. In the event that leave to proceed is granted you have essentially been given extra time in which to pursue your property settlement.
However you should always try to work within the time limits because an application for leave to proceed will only be given in certain limited circumstances.
In the event that the time limit has elapsed and you have not been given leave you may still apply through a different Court e.g. the District Court of Queensland for a property settlement through the law of equity. However this is not the most practical way to proceed and it is preferable to do any property settlement through either the Family Law Court of Australia or the Federal Circuit Court of Australia under the Family Law Act.