The 50/50 rule: fact or fiction?
The ‘50/50 rule’ is a fallacy within the realm of family law property settlements. There is no mathematical formula you can apply to the division of property.
There is, however, a time and place for a 50/50 division of property.
In what circumstances should a 50/50 division occur?
Typically, it will be appropriate in the following circumstances:
- In a long-standing relationship or marriage – say, over 15 years.
- Parties have made ‘traditional’ contributions during the relationship:
- one party has been the primary financial provider or ‘breadwinner’; and
- one party has been the primary homemaker and carer of the children.
- Parties have built up their wealth during the relationship (i.e. one party didn’t enter the relationship with significant assets in comparison to the other).
What is the legal reasoning behind this?
Family law recognises and equates parenting and homemaking contributions to financial ones.
It has been long established that contributions as a homemaker are not to be assessed in a “token way” but in terms of their true worth towards the building up of assets[1]
By one party adopting the role of carer and homemaker, the other party is ‘freed up’ to work, therefore financially contributing. The longer a relationship continues with the parties adopting ‘traditional’ roles, the more even their contributions will be viewed.
Whilst there is no official 50/50 rule, it is not uncommon for an equal split of assets to occur. This is due to many 20th century marriages fitting the circumstances listed above.
Changing relationship dynamic
The dynamics of Australian relationships have shifted – marriage no longer fits into the traditional constraints that were once the norm.
According to the most recent recorded data on the Australian Bureau of Statistics:
- Men and women have been waiting much longer to be getting married. In 2019 the average age for marriage was 32.3 for men and 30.5 for women. This is a stark contrast to 1971, where the average age of marriage was 23.8 for men and 21.4 for women.
- As a result of people waiting until later in life to get married, the average length of marriage in Australia has reduced. In 2019 the average length was recorded as 12.2 years.
- The idea of the male ‘breadwinner’ has also become less common with women increasingly working and earning more – shedding the stereotype that ‘staying at home’ is their only duty.
This shift in societal attitudes towards familial duties has destabilised the 50/50 split ‘rule’ often applied to traditional marriages. There are now significantly more factors at play.
So, who gets what?
The Family Court follows a four-step process in determining how parties’ property should be distributed following separation.
Parties may reach an agreement on the division of assets and make an application for consent orders. However, the Court must still review and approve the orders sought by following the four-step process.
- What is there to divide?
The first step is to identify the asset pool.
Assets, liabilities, superannuation interests or any other financial resources are included in the pool whether they are in one party’s name, joint names or held jointly with a third party.
From the outset, parties have an obligation to provide full disclosure to each another. Financial documents are usually exchanged at an early stage, enabling a transparent understanding of the asset pool.
- Who contributed what?
The next step involves an assessment of the contributions made by each party throughout the relationship. This includes but is not limited to the asset pool and to the welfare of the family.
Contributions can be direct (made by one of the parties to the relationship) or indirect (made by one of the parties’ family members).
There are three types of contributions:
- Financial – e.g. earning an income.
- Non-financial – e.g. renovations and improvements to a property, or managing a successful investment portfolio.
- Homemaking and/or parenting.
Each party’s contribution to these three categories is usually assessed globally as a percentage or a range of percentages. There are, however, other ways to assess contributions, such as on an asset-by-asset basis or on a category of asset basis.
- Future needs of the parties?
Next, the current and future financial requirements of each party, are assessed.
This is done by looking at a raft of factors, such as the age and state of health of each party, who will have the primary care of the children, whether one party has a more substantial earning capacity than the other, the length of the relationship and its effect on each of the parties’ earning capacities.
Adjustments to the percentage arrived at in the contributions stage can then be made to reflect any discrepancies or future financial needs of the parties.
- Is it fair?
At this point the Court will ‘step back’ to assess whether their decision is ‘just and equitable’. The final step is essential in deciding that the division of assets has reached a fair conclusion.
If you or someone you know is seeking quality advice in relation to the likely range of entitlements you may expect in a property settlement, do not hesitate to arrange an appointment with one of our lawyers at Carr & Co.
[1] Justice Crooks, J and P [2012] FCWA 100.