In Australia, there are three ways that a property settlement can occur:
1. An informal settlement: this is where the two parties agree amongst themselves on how the property should be split. This may or may not involve any paperwork or contractual arrangements.
2. Orders under the Family Law Act (“FLA”): The FLA applies to all people who are legally married and the marriage is recognised in Australia.
3. A Binding Financial Agreement: This is a legal agreement signed by both parties, under which both parties contract out of the FLA and enable a property settlement to take place.
A binding financial agreement is a technique that you can use with your partner to divide the joint marital assets. Before you enter into such an agreement, it’s important to consult a divorce lawyer to advise you on entering into such an agreement. It is a relatively new area of the law and there have been cases where binding financial agreements have been set aside by the Court.
If you are entering into a binding financial agreement or seeking orders in relation to a property settlement, and you or your partner own a business then it’s also important to obtain expert accounting advice to value the business and ensure that the property settlement does not result in paying excessive tax that could otherwise be minimised. A valuation for a business can have a significant impact on the overall assets available for property settlement and it’s therefore critical to obtain expert financial advice. In most cases, a forensic accountant familiar with the family law / divorce process will be able to assist you with these matters. We find that the cost of the advice is outweighed by the additional benefit flowing to the client.
There is no requirement for court approval or registration of a financial agreement, however both parties must have independent legal advice prior to its execution. A certificate of independent legal advice that is required to be annexed to the financial agreement must canvass two matters in relation to the party advised. This includes “the effects of the agreement on the rights of the party” and “the advantages and disadvantages, at the time that the advice was provided”.
Spouses may enter into a “termination agreement” that ends the earlier financial agreement entered into. Both parties must have independent legal advice prior to the execution of a termination agreement.
About the Author
Andrew Firth is a forensic accountant based in Sydney. He is a Director of Rushmore Group and specialises in financial reconstructions, money tracing, divorce, and other forensic accounting engagements.
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