Post Separation Contributions – Will You Get Credit for Things That You Do and Money That You Earn After Separation?

19/11/2019

Contributions

In property matters the Family Court of Australia or Federal Circuit Court may need to consider what the parties contributed to the property pool after separation to decide how property should be divided.  These post separation contributions can be direct financial contributions, indirect financial contribution or contributions for the welfare of the family.

When are Contributions Made

Contributions will be made by parties during three phases of a marriage or relationship. These are:

1. Initial contributions – the assets and liabilities that each party bought to the marriage or relationship.
2. The contributions made by a party during the marriage or relationship.
3. Contributions that are made after separation. 

When Are Assets Valued

It is sometimes assumed that the Family Court or Federal Circuit Court will decide how to divide property on the basis of the property and assets in existence at the date of separation and in accordance with the value of the property and assets as at the date of separation.  This is not the case.  If the matter is not settled, the Family Court or Federal Circuit Court will look at the assets and liabilities as at the date of the hearing and the Court will value the assets (and liabilities) as at the date of the hearing and not as at the date of separation. 

Effect of Delay

If there is a significant delay (and there could be a delay of years) between separation and settlement or determination of property division by the Family Court or Federal Circuit Court, then one party can be significantly disadvantaged if they have made the superior post separation contributions.

Recent Case Law – Kowalski and Kowalski

In the case of Kowalski this very situation arose. There was a period of years between separation and the Final Hearing.  The marriage had been one where the husband was the sole breadwinner and the wife was the primary homemaker and cared for four children.  After separation in 2009 the husband’s employment changed and in the years following separation had a taxable income of approximately $9,000,000 and had received a significant redundancy package.  By the time of the trial, the husband was not employed and the wife remained as the primary carer of the children.  The husband asserted that the division of property should be made on the basis that there had not been an equal contribution by the parties because the significant amounts within the pool of property (as at the date of the hearing of the case) had been contributed by the husband after separation.  Justice Aldridge assessed the contributions of each party as equal and then made a further adjustment to the wife to take into account the fact that she had the primary care of the children. 

The husband appealed.  The primary issue on appeal was whether it was just and equitable to assess the post-separation contributions as equal.  The Full Family Court dismissed the appeal.  The outcome was that the wife received a settlement which took into account the husband’s very significant post-separation contributions.  The risk in delaying commencement of property proceedings is that the Court will deliver a result which effectively shares post separation contribution made by one party with the other party. 

This is a warning in relation to delaying property settlement.  Once separation occurs you may not keep all that you contribute post separation.

The circumstances post separation can vary in different matters for example:

1. That each party proceeds on a similar basis as they did prior to the separation eg working in the same job, earning the same or a similar income etc; and
2. As in the above case; the post separation income (up to the time of the hearing) was very significant and greater than the rate earned prior to separation.  Further, at the time of the hearing, the husband was not employed.

In our view it would be a relevant factor to be considered and it would be different if at the time of the hearing, the husband was still continuing to earn a significant income.  Often one party earns a significant income and there are risks that that person’s employment will cease at that high level.  This causes great difficulties.  We see this often and in these circumstances you should make every attempt to resolve the matter as soon as possible.

If you are in the process of undertaking financial/property settlement and have any queries in relation to your entitlements and contributions made or received pre or post separation, your delay could put you in a disadvantageous position. Please contact Richard Watson Senior Family Law Solicitor or his Personal Assistant Shereen Da Gloria to discuss your matter and seek timely advice and avoid the angst that often times accompanies financial/property settlement.

This is only a preliminary view and is not to be taken as legal advice without first contacting Watson & Watson Solicitors on 9221 6011.