It is fairly common knowledge these days that after a couple has been in a de facto relationship for a period of time, each partner is able to claim an equal share in some of the individually or jointly-owned property. 

The property that becomes eligible for equal division is called “relationship property.”  Less well known is the detail - what can be claimed, when and how much?  Those can become very complicated questions to answer.

When does the equal sharing regime start?

As a general rule, for equal sharing of relationship property to apply the partners need to have been in a qualifying relationship for three years.  Shorter relationships are considered to be “of short duration” and have different rules that apply to them.

What automatically becomes relationship property?

Some types of property will always be considered relationship property once a qualifying relationship has been established.  The list includes the family home (being the principal or sole residence of the partners).  

Importantly, the family home is considered relationship property regardless of when and how it was acquired.  This can have a major impact for people who have owned the house the partners live in before the relationship started.  For example, a freehold house purchased by one person before the relationship using their savings will automatically be open to equal division after three years.

Another type of property that is automatically considered relationship property is the family chattels.  This includes household furniture, appliances and equipment tools, vehicles, caravans, trailers and boats used mainly for relationship purposes.  It also includes any pets.  While often this isn’t a huge problem, in some cases it can leave people feeling very hard done by after a separation.

As well as the family home and chattels, the following is also automatically considered relationship property if the relationship qualifies:

  • Property owned jointly or in common in equal shares;
  • Property owned prior to, but acquired in contemplation of, the relationship or intended for the use of both parties;
  • All property acquired by either spouse after the start of the relationship (including all income);
  • All property acquired after the relationship began for the common use or benefit of both parties;
  • The proportion of any value of superannuation, life insurance or other insurance policy attributable to the period of the relationship.

Any property not falling under a category of relationship property remains the separate property of the person owning it at the start of the relationship.  However, it is also possible for separate property to become relationship property, in special circumstances.

When does separate property become relationship property?

There are a number of ways in which separate property can become, either partially or wholly, relationship property.  This includes where relationship property is used to increase the value of separate property (the increase in value will be relationship property). 

Where one partner has increased the value of the other partner’s separate property through their own actions the increase in value is, again, relationship property (although the division there depends on the contribution of each partner to the increase in value).

Where one partner uses their own separate property to acquire, improve, increase the value or amount of interest in the couple’s relationship property, then the separate property becomes relationship property.

 

Gifts, Inheritances and acquisition as a beneficiary under a trust…

There are some special rules for property acquired by a partner from an inheritance, gifts or property received as the beneficiary of a trust.  Property acquired by those methods remains separate property unless, with the owner’s consent, it is so intermingled with relationship property that it is unreasonable or impractical to regard it as separate property.  The exception to this is if the property is the family home or chattels, or is used to acquire the family home or chattels.  These always remain relationship property.

Additionally, gifts between partners are not relationship property unless the gift is used for the benefit of both partners.

The rules for dividing property can quickly become very complicated.  However, people are able to contract out of these provisions either before or during their relationship.  This has the advantage of allowing them to protect certain assets or types of assets as their own separate property and, in the event of a separation, should make dividing up the property easier. 

If you are unsure about who is entitled to what after a separation then it is always wise to talk your situation over with a lawyer so you know where you stand.  A lawyer will also be able to help with a contracting out agreement if you would prefer to follow a different process for dividing up property in the event of a separation.

At Rainey Collins we offer a fixed fee initial family law consultation so clients can be advised of their rights and options knowing in advance what the cost will be of that initial meeting. Clients can, after the meeting, make decisions about proceeding further armed with knowledge of the options available.