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WOMEN’S LEGAL SERVICES NETWORK

ISSUES PAPER ON FAMILY PROPERTY LAW REFORM

June 1999

The Women’s Legal Services Network (WLSN) is preparing a response to the Government’s Discussion Paper (DP) Property and Family Law - Options for Change.

This Issues Paper outlines the Government’s proposals, the assumptions on which they appear to be based and our concerns about their possible impact on women. Please send your comments to Women’s Legal Centre (ACT & Region) Inc., GPO Box 1726, Canberra City, ACT 2601, fax 02 6247 0848, tel 02 6257 4377, email wlcact@ozemail.com.au by Friday 18 June.

If you prefer to download this Issues Paper takewordgif.gif (1042 bytes) this link (copy of the IP below in MS Word 97 saved in rich text format)

We also encourage you to make your own submissions which should be sent to Family Law Branch, Attorney General’s Dept., Robert Garran Offices, National Circuit, ACT 2601. The deadline for submissions is Wednesday 30 June. There is a resource list at the end of this paper.


Assumptions underlying the government's proposals * Option 1: Presuming Equal Contributions * Option 2: Community of Property * Towards Option 3: Fair Shares * Family Property Law Reform: Resource List *

Assumptions underlying the government’s proposals

There are some questionable assumptions in the DP:

 

1. The Child Support Scheme means the day-to-day support of children no longer needs to be considered in property and spouse maintenance proceedings. The facts are that child support does not cover the full cost of caring for a child; many liable parents do not pay what they are supposed to; others (especially some self-employed people) try to avoid paying; and unemployed parents pay minimal amounts. We believe it is wrong to assume that the Child Support Scheme means the day-to-day support of children should not be considered in property settlements? Do you agree?

2. Women and men are increasing equal in the workforce, so property should be divided equally on marriage breakdown. Although women’s participation in the workforce has increased, women are still mainly employed in low paid, part-time or casual jobs. The kind of work that women do is still undervalued, and is not paid on the same level as men’s work. Women’s earning capacity is also limited by the fact they still do most of the housework and childcare. We believe that women are still economically disadvantaged and that the law should recognise this. Do you agree?

3. The decisions of the Family Court are not explained adequately or at all. A decision can be appealed if a judge does not base a decision on the facts or does not apply the law properly or does not give adequate reasons for the decision. Do you think decisions made in the Family Court are explained well enough?

4. It is difficult to know how property should be divided on marriage breakdown because the law is unclear. It is possible to work out in most cases what someone should get in a property settlement as long as both people have all the information they need. The main confusion is about how superannuation should be included. Do you agree that apart from superannuation the law is clear?

5. A typical family law property dispute involves a large amount of property. The DP often refers to typical family property as being the farm or a business. In fact an average property pool might include a mortgaged home, a car, a small amount of savings and some superannuation. Situations where there is only debt or a very small amount of property are also common. We believe that any changes to the law should recognise that there is a wide range of property pool sizes. Do you agree?

Have you identified any other assumptions in the DP which need to be addressed in submissions?

The DP sets out two options for dividing property:

 

Option 1: presuming equal contributions (DP paras 5.8 - 5.31)

Option One proposes a starting point of 50/50 for dividing the property based on the assumption that each person has contributed equally to the property. The key features of this proposal are as follows:

1.1 Property - what is included (DP para 5.8)

All of the property belonging to either the husband or the wife is included in the property pool for distribution. This is the same as the current law. What is new is that the Government is also proposing to introduce binding financial agreements, including pre-nuptial agreements. Such an agreement will be a legally enforceable contract between a husband and a wife which could exclude property from the pool of property to be divided on separation. Under the current law these agreements are not legally enforceable.

Comment: A binding financial agreement may lead to an unfair division of property.Women are more likely to be disadvantaged by a binding financial agreement because they are generally in a weaker financial position with less bargaining power. The Government has not yet said how these agreements will work and when the Family Court would be able ignore them. We believe that there must be more debate about the introduction of binding financial agreements. If they are introduced, there must be safeguards to ensure women and children are not disadvantaged. Do you agree?

1.2 Superannuation

Superannuation will be treated as property. At the moment superannuation is not treated as property but as one person’s financial resource.

Comment: Changing the law to treat superannuation as property is good. Our concern is that the change may disadvantage women if allowance is not made for women with children to keep the family home. Superannuation will usually be split equally but cannot be used until the husband turns 55 or retires. The house and other property will be divided at the time of separation. This means that unless the wife’s share of the other property is enough to pay the husband for his share of the house, the wife will not be able to keep the home. At the moment the wife often keeps the home while the husband keeps his superannuation. We believe that the law should recognise the importance of the parent with the primary care of the children keeping the home. We also propose that there should be access to superannuation when property is divided where there is financial hardship. Do you agree?

1.3 Contributions to the property - 50/50 starting point

As a starting point the contributions each person makes to the property are assumed to be equal. Unless one person says 50/50 is not fair, the property will then be divided on this basis. The current law does not assume equal contributions but in practice contributions are usually considered equal.

Comment. We are concerned that women will be under pressure to settle for 50% of the property when at the moment, if they have the children in their care, they are likely to receive 60% or more. Most people negotiate their own property settlement, often without legal advice, and they may settle on a 50/50 basis when it is not fair in their situation. If the community believes that there is a 50/50 rule, people will have to go to Court to try to get a settlement that is not 50/50. We believe the proposed change in the wording of the law could make it more difficult for women to negotiate a property settlement greater than 50% without going to Court. Do you agree?

1.4 Assessing contributions and future needs - beyond 50/50 (DP para 5.14)

If asked by either the husband or the wife, the Family Court would be able to consider whether their contributions were equal or not. The Option allows the Family Court to first consider the actual contributions made by each person to the property and to the welfare of the family. Secondly it would look at the future needs of each person.

(1) Actual Contributions (DP para 5.15-5.16) Financial contributions may include income, property owned before the relationship and lottery wins. Non-financial contributions may include home improvements or the work of homemaker/parent. The financial and non-financial contributions would usually be considered equal. If one person said that contributions were not equal, he or she would have to prove it. The impact of violence on a person’s ability to contribute would be considered. The current law distinguishes between financial and non-financial contributions to property and contributions as homemaker or parent to the welfare of the family. The DP proposes treating contributions as homemaker or parent as a non-financial contribution to the property and not as a contribution to the welfare of the family.

Comment: The proposal may disadvantage women if it fails to distinguish between non-financial contributions to the build up of family property, and contributions to the welfare of the family. Unless the law makes clear the importance of contributions to the welfare of the family, it may be undervalued. There is also a risk that when the Family Court is assessing actual contributions, the new law will encourage a more mathematical approach. This will disadvantage women whose main contribution is non-financial. We believe that the contributions of women as homemakers and parents should be examined separately from other non-financial contributions so that they are not overlooked. Do you agree?

(2) Future Needs (DP para 5.17) The proposal would keep most of the factors listed in the current law about future needs such as the age and health of the husband and wife, responsibilities for children, length of the marriage (full list in DP Appendix 1 pp51-53). The factors to be removed are: the needs of a person who wishes to continue as a full-time parent; whether child support is paid or is likely to be paid; and the impact of the length of the marriage upon one person’s income, earning capacity, property and financial resources. The Family Court would also be able to consider ‘any other fact or circumstance’ to achieve justice between the husband and wife.

Comment. The factors to be cut out from the list of future needs would have a negative impact on women. Women are more likely to look after children full-time, more likely to have reduced earning capacity as the result of a long marriage and more likely to need child support. We believe that factors relevant to the needs of women as homemakers and parents should be kept to make sure they are properly considered. Do you agree?

(3) Family Violence

In limited circumstances judges have recognised the relevance of family violence to decisions on property although it is not mentioned in the Family Law Act. The DP suggests that family violence be taken into account in assessing the victim/survivor’s contribution, but it does not say that it would be a separate factor. It also refers to the impact of family violence on a person’s future earning capacity.

Comment: It is good that the law will recognise violence as relevant to a property settlement. There are more ways that the impact of violence could be considered. For example, the Family Law Act could provide a right to claim damages/compensation for violence in marriage. Do you agree that the proposal for change is good? Do you agree that there should be a right to claim compensation? Are there other ways that the impact of violence could be considered in a property settlement?

1.5 Spouse maintenance (DP paras 5.21- 5.29)

Spouse maintenance will be considered at the same time as property division. The DP also proposes that spouse maintenance stop automatically when a person enters a stable de facto relationship or remarries. Under current law spouse maintenance stops on remarriage, although if a person is living with a new partner the financial circumstances of that relationship can be taken into account.

Comment: If spouse maintenance is only considered at the time of property division and cannot be reconsidered at a later date, this would disadvantage women. Do you agree? The proposal to automatically cut-off spouse maintenance from when a stable de facto relationship is formed is unfair because people in a de facto relationship do not have to financially support each other. We believe that existing law which allows the resources of a new relationship to be considered is better than automatically stopping spouse maintenance when a person is in a stable de facto relationship. Do you agree?

General verdict on Option 1

Assuming a 50/50 starting point for assessing contributions to property could be helpful. It would make clear that the contribution of women as homemakers and parents is of equal value to men’s financial contribution. However, it may result in future needs being inadequately taken into account because people will assume that property should be split 50/50. Do you think the starting point of 50/50 is good? If so, how can the concerns about future needs be overcome?

 

Option 2:community of property (DP paras 5.32-5.50)

Option 2 would be a more radical change from the existing law than Option 1. Option 2 is described as a ‘community of property’ system, although what is ‘communally owned’ is strictly limited. On marriage breakdown, each person would get 50% of the communal property. A person would be able to seek more than 50% of the communal property on the basis of future needs or the ‘economic consequences of the marriage and its breakdown’.

2.1 What is ‘communal property’? (DP para 5.33- 5.38)

Communal property is defined as property obtained during the relationship, and any increase in the value of property which was owned by either person before the relationship. So a house or business owned before the marriage would not form part of the communal property, but any increase in the value of the house or business would. Some property obtained during the marriage by either person may be excluded from the communal property and kept by the person who received it (eg, personal injury compensation award). This is different from the current law where everything owned by the husband and wife is in the property pool and then divided according to contributions and needs.

Comment: The term ‘community of property’ is misleading because not all of the property of the husband and wife is divided. There are many situations where there will not be a fair property settlement because some of the main property is excluded. The following example illustrates the problem. The only property of the marriage is a farm brought into the relationship by the husband. Both husband and wife work hard in the farm for 10-15 years. Despite this, the value of the farm increases only slightly in value. If they separate, the husband would keep the farm and the wife would receive little or nothing of the value of the farm. Under the current law, the husband’s contribution bringing the farm into the relationship would be recognised. So would the contribution the wife made through her work. Both would be entitled to a share of its full value. It is also not clear whether property bought during the relationship with money from the sale of property owned before the relationship is included in the ‘community of property’. We believe that automatically excluding property owned by either person before the marriage from the communal property to be divided on separation will often produce unfair results. Do you agree?

2.2 Superannuation

As in Option 1, superannuation would be treated as property rather than as a financial resource. See previous comments in 1.2.

2.3 Income and earning capacity as property (DP para 5.34)

It appears that a person’s income would be treated as communal property. This means each person would be entitled to an equal share of the ‘income stream’.

Comment: The proposal to treat income stream as communal property is good. In many circumstances the husband and wife do not have much property but the husband has a very good income which is currently treated as a financial resource of his. However the definition of communal property does not include the earning capacities (including skills and qualifications) of the husband and wife. Do you agree it is a good idea to treat income as communal property? We believe that the earning capacities of the husband and wife should be treated as communal property. Do you agree?

2.4 Contributions not considered (para 5.40)

Under this option, there would be no consideration of the contributions of the husband and wife. The Family Court would not be able to take these into account.

Comment: This would be a significant change to the current law . It has taken a long time for women’s non-financial contributions and contributions as a homemaker/parent to be recognised at all, although they are still not recognised enough. There is a risk that if contributions are no longer considered, this important gain for women will be lost. Do you think non-financial contributions and contributions as a homemaker/parent should be considered?

2.5 Future economic needs: alternative approaches (DP paras 5.41-5.50)

One person may be given greater than 50% of the communal property only if their future needs require it. Two different ways of working this out are given in the DP.

(1) Future needs (DP para 5.42-5.44): This approach is similar to the proposal in Option 1 (see 1.4 (2)) except that that the Family Court would not be able to consider ‘any other fact or circumstance’. This reduces the Family Court’s discretion and is intended to make it easier for people to work out their entitlements. The risk is that this will reduce flexibility and relevant future needs will not be considered. We believe that the Family Court should be able to consider "any other fact or circumstance". Do you agree?

(2) Economic consequences (DP para 5.45-5.50): The alternative approach is based on Canadian law. Its objectives are to promote economic self-sufficiency, relieve economic hardship and take into account economic advantages and disadvantages. The factors considered include future earning capacity, future employment prospects, opportunities lost because of marriage, childcare responsibilities and qualifications and skills of either person. Spouse maintenance and child support would be considered. These factors are broader than the above approach, but are more limited than the list of factors under the current law. The advantage of this approach is that it tries to address women’s economic disadvantage as a result of marriage. However, the DP makes it clear that if both persons are in paid work but have different earning capacities (which is typically the case), the property would probably still be split 50/50 unless it can be proved that the inequality is a result of the marriage rather than one person’s greater skills. We believe this approach will disadvantage women, especially because the economically weaker person has to show that their lower earning capacity is caused by the marriage. Do you agree?

General verdict on Option 2

The idea of ‘communal property’ may seem good at first because it considers marriage as an equal partnership with equal ownership of property. However, it will not result in fair property settlements for women. Property settlements must be based on the reality of marriage, which is that many women give up economic independence to look after their families. Option 2 does not do this. Limiting the property pool to communal property means that even though future needs are still considered, women may not get a fair share.

 

Towards Option 3 - Fair shares

There are features of the Options in the DP which we believe could improve the law:

Are there other positive aspects of the Options in the DP?

Other possible improvements which came out of considering the Options are:

We also believe that the following proposals would result in fairer property settlements:

Do you agree with these suggestions? Do you have any other proposals?

Do you have any other comments on the proposals in the DP?

 

Family Property Law Reform: Resource List

Fair Shares: Barriers to Equitable Property Settlements for Women, April 1999, available from the WLC (ACT & Region) Inc. tel 02 6257 4377

Australian Institute of Family Studies Research (AIFS) tel 03 9214 7888

Settling Up: Property and Income Distribution on Divorce in Australia, McDonald P (ed) (1986) AIFS with Prentice Hall, Melbourne. Settling down: pathways of parents after divorce, K Funder et al, (1993) AIFS. These studies show that women’s income and standard of living decline much more dramatically after separation than men’s.

The Australian Divorce Transition Project is a survey on the consequences of divorce. Property division is a major theme of the research. Results are not yet available but the following publications report on aspects of the study:

Superannuation and divorce in Australia, John Dewar, Grania Shehan and Jody Hughes, Briefing Paper No 6, Australian Institute of Family Studies, April 1999.

Spousal Support in Australia: A Study of Incidence and Attitudes, Juliet Behrens & Bruce Smyth, Working Paper No 16, Australian Institute of Family Studies, February 1999.

Australian Law Reform Commission Reports (ALRC): tel 02 9284 6333

Matrimonial Property, Report No.39 (1987) - a comprehensive review of the law on family property. It recommends ‘structured discretion’ similar to our current system, but with a starting point of equal shares in the value of all the property.

Equality Before the Law, Report No 69 (1994). Part 1 paras 2.12 - 2.22 on gender inequality; paras 9.51- 9.56 on matrimonial property. ALRC again recommends that a rule of equal sharing should be the starting point in distribution of property, but the factors to be considered when departing from this should include the impact of violence on past contributions and on future needs (rec.9.6). Part II paras 11.20-11.24, a case study on farm women, focus on the recognition of unpaid work. ALRC recommends gender awareness programs for judges with information on women’s unpaid work and its significance for the economic survival of their families(rec 11.2).

Multiculturalism and the Law, Report No 57 (1992). Paras 5.43- 5.46 on pre-marriage contracts. ALRC recommends making these enforceable subject to adequate safeguards to prevent injustice. Para 3.45 concerns access to interpreters and bilingual staff at the Family Court.

Family Law Council tel: 02 6250 6519

Violence and the Family Law Act: financial remedies, Discussion Paper, August 98.

Women’s economic position

All Change, Still Gendered: The Australian Labour Market in the 1990s, Barbara Pocock, the Journal of Industrial Relations, December 1998 Volume 40 No 4 - reports that there are few signs that women’s employment status is improving significantly.

Report of the NSW Pay Equity Inquiry, December 1998, which found that women’s work is still systematically undervalued. There is a digest of the report in (1999) EEO 92-960

Garcia v National Australia Bank, (1998) 72 ALJR 1243 A recent High Court decision in a case of sexually transmitted debt confirmed the continuing economic vulnerability of wives.

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