How is property divided at the end of a de facto relationship?

While de facto relationships are like marriage; and the law treats them in a similar way concerning parenting and property distribution, the intention behind entering into a de facto relationship is widely variable, and this impacts the treatment of a division of assets in the Family Court.

For some, living together is a convenient way to trial compatibility before making any longer term commitment, believing that if it goes wrong it is simpler to go their own way and cut ties. For others, commitment may never exist in any real way but the couple has chosen to live together while in a relationship; and for others there may be a shared commitment to a long-term relationship, with no intention to marry.

Given the reasons for entering into a de facto relationship are so different from those choosing to marry, is it fair to treat all de facto relationships the same way? While the answer may be a resounding “no”, the law is constrained by the legislation in the Family Law Act and has to apply its own version of justice and equity.

Since 2009, the Family Courts, under the Family Law Act, 1975, have jurisdiction to hear cases involving de facto property. As a general rule (although there are exceptions), a de facto relationship exists if the couple meets the following criteria:

• They are NOT legally married to each other;
• They are not related by family
• Having regard to all circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

The circumstances may include any or all of the following

• the duration of the relationship;
• the nature and extent of their common residence;
• whether a sexual relationship exists;
• the degree of financial dependence or interdependence and any arrangements for financial support between them;
• the ownership, use and acquisition of their property;
• the degree of mutual commitment to a shared life;
• whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
• the care and support of children;
• the reputation and public aspects of the relationship.

It is important to note that it is not necessary for a couple to be having a sexual relationship for a de facto relationship to exist, provided that enough of the above circumstances are relevant.

Once a de facto relationship has been proven to exist, the Court must then consider the question of whether it is just and equitable to alter the existing property interests of the parties. Incidentally, this is also the case for married couples where property is held in sole names.

Case study – Chancellor & McCoy [2016] FamCAFC 256

In the recent case of Chancellor & McCoy on 2 December 2016, the Court heard an appeal involving a same sex de facto relationship of 27 years. Unusually in that case, the parties had always maintained separate financial affairs and bank accounts and financially supported their own properties in their respective names. There was no legally joint property to speak of and neither party had provided for the other in their wills. There had seemingly been no financial plan going forward for a shared life together despite the length of the relationship. While there was common use of property, one partner contributed to the cost of shared living expenses. The appellant’s appeal for a property adjustment was dismissed and no further order was made.

If there is a strong intention not to share assets at the end of the relationship, de facto couples must be vigilant in keeping all of their financial affairs separate

This case shows that if there is a strong intention not to share assets at the end of the relationship, de facto couples must be vigilant in keeping all of their financial affairs separate. However, it is not enough to rely on this fact alone as in the great majority of circumstances, the Act also considers non-financial contributions by way of home-making and parenting children. This factor alone may persuade the Court to alter existing property interests between the parties.

To avoid this uncertainty, couples should consider establishing a Financial Agreement, which sets out clearly the plan for the distribution of assets and liabilities should the relationship break down. Streeterlaw can advise you on whether a Financial Agreement is suitable for you.

For further information or advice, please contact the Family Law experts at Streeterlaw on 81970105 or email advice@streeterlaw.com.au.