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Family Law Property Division – The Significance of Gifts or Contributions Made by Third Parties

02/07/2021

When the Family Court of Australia or Federal Circuit Court of Australia is asked to hear and determine an application to divide assets and liabilities between separated spouses, they will consider who made the contributions to the acquisition, maintenance and improvement of property. 

The Family Court or Federal Circuit Court will also consider whether an adjustment needs to be made to one or both parties by reason of the existence of one or more of the factors set out in s75(2) of the Family Law Act 1975. 

What is a Contribution?

The Court will not make an Order for property division unless it is satisfied in all the circumstances, that it is just and equitable to make the Order.  In determining whether the Order should be made, the Family Court or Federal Circuit Court looks at the contributions made to the property pool.  Contributions can be:

(a)        A financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any property of the parties.

(b)        A contribution other than a financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage for the acquisition, conservation or improvement of the property.

(c)        The contribution made by a party to the marriage for the welfare of the family constituted by the parties to the marriage and any children of the marriage.

The approach taken by the Family Court / Federal Circuit Court is to look at the contributions of the type set out above made by each party and to determine what property division should be made on the basis of those contributions but also taking into account the adjusting factors set out in Section 75(2).  However, it is not always a party to the marriage or a child of the marriage who makes contributions.

This article does not deal in detail with the circumstances in which the Court may make a s75(2) adjustment.

What if the Contributions are Made By Someone Who is not a Party to the Marriage or the Relationship? 

Contributions can be made by third parties and most usually by the parents of the parties to the marriage or relationship.  In other words, contributions made by or on behalf of a party to the marriage are taken into account and it is important that the contributions which are made by the third party are attributed to one or sometimes both of the parties to the marriage. 

Who gets the “credit” for contributions on behalf of a party can make a great difference to the outcome of property proceedings for each of the parties.   

These outside contributions are welcomed when times are good but these contributions become the subject of argument and disagreement when separation occurs and the bad times arrive. 

Who Can Make a Contribution and Who Gets the Benefit of that Contribution? 

The Family Law Act (Section 79(4)) provides that these contributions can be made by or on behalf of a party.  The most common example of a contribution made not by a party to the marriage but by a third party, would be a gift from the parents of one party of money or specific property. 

Early cases considered whether or not such gifts should be considered as a contribution by or on behalf of a party to the marriage or whether they should be considered as another fact or circumstance under Section 75(2)(o) of the Family Law Act.

How Will the Court Apply the Benefit of Such Contribution? 

What was the Intention at the Time the Contribution was Made by a Third Party? 

The actual intention of the donor may not have been carefully considered at the time the gift was made.  In circumstances where a property division is being considered, it is often asserted that what was intended to be a gift was in fact a loan and will need to be paid back.

In determining the weight to be given to a gift to only one party the Court may:

(a)      Allow the party to whom the gift was given to be credited with the value to which the gift had increased at the date of the hearing. 

(b)      Give the party to whom the gift was given, credit for the initial value of the gift.

(c)      If the gift has been mixed with other contributions over a long period of time not attempt to give any particular value to it, but merely to consider it is a fact to be taken into account along with other relevant factors. 

Gift to Both Parties?

Even where the gift by a relative of one party is made to both parties, it is open to the Family Court / Federal Circuit in appropriate circumstances, to regard it as a contribution by the party to whom the donor was related.  In the marriage of Pices the Court took into account the relationship of the spouse and the spouse’s parents in concluding that the gift from the parents should be regarded as a contribution by the related spouse.  If however the gift was clearly intended to be given to both parties, the Court will regard it as an equal contribution. 

Non-Financial Contributions by a Third Party 

It has been held that a contribution of a non-financial sort may be made by a relative.  Provision of childcare or provision of accommodation, are examples of such non-financial contributions that can be made by a parent or relative and can assist one party or the other in property proceedings. 

If you are entering into financial/property settlement with your spouse or partner and a financial or a non-financial contribution has been made to the marriage or de facto relationship by a third party/parent to the marriage or relationship, this can often times lead to a stressful and complex situation.  At Watson & Watson Lawyers our experienced Family Lawyers can assist you in financial/property settlement matters and related family law matters.  Please contact Richard Watson Senior Family Lawyer or his Personal Assistant Shereen Da Gloria to discuss your matter and seek appropriate advice.

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

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