The Property Relationships Act

The Property Relationships Act 1976 provides the rules for classifying and dividing property when a relationship between a married or de facto couple ends through separation or death.

In this article we examine the effect of the act and give some examples of what the act means and how it might affect you.

Married couples, no matter how long you have been married.
De facto (including same sex) couples if your relationship has lasted at least 3 years. The Act only applies to shorter de facto relationships in special circumstances.

It is important that you think about how the Act affects you now, rather than waiting until you have been in a relationship for 3 years.

Rules for classifying & dividing property
Usually all property acquired jointly or by one partner during the relationship is relationship property, including:

Family home, whenever acquired
Family chattels, whenever acquired
Property owned jointly by the parties
Property acquired in contemplation of relationship or for “common use & benefit”
Increase in value of separate property, including superannuation & life insurance policies
Joint debt or debt incurred because of the relationship

Relationship property is usually shared equally when your relationship ends.

Most property owned by a partner before the relationship began is separate property, although there are some exceptions to this rule. A common exception is where you are living in a home that was owned by one of you prior to the relationship. The other common exception is your chattels, which become relationship property by being used in your family home. Gifts and inheritances you receive during the relationship are separate property, unless you mix them with relationship property – for instance, where you use an inheritance to pay off the mortgage. There are some exceptions to this rule that your lawyer can advise you about.

Am I in a de facto relationship?
A de facto relationship is a relationship between 2 people who are over 18, live together as a couple and are not married. In deciding whether you are a de facto couple, a Court can consider all of the circumstances relevant to your relationship, including:

How long the relationship has lasted
Whether you share a home
Whether you have a sexual relationship
Financial and property arrangements
If you are mutually committed to a shared life
Care & support of children
Who does the household chores
What other people think the relationship is

You do not need a “yes” or “no” for every point. Each case is considered on its own circumstances. Sometimes it might be impossible to say whether a de facto relationship exists. The Court decides how important any one factor is in a particular case.

What happens if my relationship has only lasted a short time?
The equal sharing rules only apply to a marriage of less than 3 years in special circumstances. Usually when a marriage of short duration ends, property is shared between the partners according to their contribution to the marriage.
In general, the Act does not apply to de facto relationships of less than 3 years. Where it does apply, the Court may divide the property according to the contribution of each partner to the relationship.

What are contributions to a relationship?
Contributions to a relationship can be either financial (e.g. income) or non-financial (e.g. childcare). Financial contributions are not considered to be more valuable that non-financial contributions.

What if our financial positions are different when we separate?
In some situations, the Court can order lump sum payments from one partner to another. This can help to address a difference in financial position that arises at the end of a relationship because of the division of responsibilities in the relationship. For instance, Jane has been able to progress her career because John left his job to look after their children. Jane now earns $100,000 per year but John is on a benefit. The Court can order that Jane pay John a sum of money to help address this difference.

What happens to property on death?
The rules that apply when couples separate also apply when a relationship ends by death.

If your partner dies, you can choose to take what they left you under their will, or you can choose to apply to the Court for a half share of relationship property under the Act. You must sign a special written notice recording your choice, and a lawyer must certify that they have explained the effects and implications of your choice to you.

It is important to think about what will happen to your property if you die before your spouse. Unfortunately, your will is no longer sufficient to guarantee the distribution of your property according to your wishes. If you have not addressed issues properly, your spouse or children may be able to make a claim against your estate. Your lawyer can advise you on the possible implications this holds.

Does the Act have to apply to our property?
No. Your lawyer can prepare an agreement which you can sign before or during your relationship, recording the “rules” you want to apply to the division of your property. But the later you leave it, the more difficult it can be to reach agreement. We recommend that you sign an agreement at the earliest possible opportunity to ensure that your property is adequately protected and each of you knows where you stand in the future.
Agreements can specify:

Whether a de facto relationship exists & when it started
If property is separate or relationship property
Contributions made by each party to a certain item of property, such as a house
The agreement between you where you are both living in one party’s home
How property is divided on separation or death

To be binding, an agreement must be in writing and signed by each party. A lawyer for each of you must witness your signature and certify that they have explained the effects and implications of the agreement.
This is also a good time to review your will to ensure that it complies with what you have agreed to.

How do we record our agreement if we separate?
Your lawyer can prepare an agreement that records how you have agreed to divide your property after you have separated. To be binding, an agreement must be in writing and signed by each party. A lawyer for each of you must witness your signature and certify that they have explained the effects and implications of the agreement.

Why should I see a lawyer now?
It is never too early to speak to a lawyer about how the Act might affect your relationship.
Here are some examples of when the Act can apply to your relationship:

Jane and John have been in a close and dependent relationship for about 3 years but have not lived together. Jane’s adult children know their mother and John are friends, but do not think they are in a relationship. Jane dies and in her will leaves all her property to her children. John makes a claim against Jane’s estate as her de facto partner.
Jack and Jess have lived together for 2 years and buy a house together using Jack’s inheritance from his mother as the deposit. They separate 2 years later but do not have an agreement recording the inheritance as his separate property. Jess can claim an equal share in the house.
Julie is a successful architect and has a family trust that owns her business premises. Jim came into the relationship with little, and Julie used her income to help Jim establish a business. Julie has gifted money to her trust from her income over the period of her relationship with Jim. Julie and Jim separate. Jim is entitled to make a claim against Julie and her trust.
Jeff and Judy have been in a relationship for 5 years and have lived in a rented home. Jeff decides they should move into the investment property he owned prior to the relationship. The property becomes the family home which is relationship property.

This article has been prepared by Cavell Leitch Law for general information purposes only and important exceptions and other relevant factors may not have been included. If understanding the legal area covered by this article as it affects your specific circumstances is important to you then please contact us for a proper legal opinion.