Family Law Property Settlements - the difference between an asset and a financial resource

When completing a property settlement under the Family Law Act 1975 (“the Act”) you are required to consider both the property and the financial resources of the parties.  What is a financial resource is not always well understood.

What is property defined as under the Family Law Act?

The Family Law Act 1975 (“the Act”) defines “property” as “property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion”.  This includes things like real estate, investments, vehicles, household furniture and whitegoods, savings and superannuation entitlements, regardless of who owns the asset. When people think about negotiating and resolving their property settlement with their former spouse, it is these sorts of items that people usually think of, and how those items are going to be divided between them and their former spouse.

What is a financial resource?

Another consideration in negotiating and finalising a property settlement is whether or not either party has access to, or the benefit from, a financial resource. Unlike property, the Act does not include a specific definition of what a financial resource may include however, the High Court case of Hall & Hall defined a financial resource as “a source of financial support which a party can reasonably suspect to be available to him or her to supply a financial need or deficiency”. To put it another way, a financial resource is something that can be used by a party to generate a future income or assets.

Financial resources can include things like:-

1. Funds a party may be expecting to receive from a pending personal injury claim, redundancy or inheritance;
2. Funds that a party are owed under a loan agreement which are to be paid back to that party in the near future;
3. A party’s interest as a beneficiary in a trust;
4. Goodwill a party may have in their business (but care needs to be given if a business valuation has included a component for goodwill); or
5. A party’s capacity to borrow money.

The property pool

A financial resource does not form part of a property pool. However, a financial resource is a relevant factor in a property settlement when it comes to assessing each party’s respective future needs, that is, their respective abilities to support themselves into the foreseeable future, and whether or not one party or another should receive some sort of adjustment in their favour due to the other party’s access to a particular financial resource. 

Ordinarily it is better for something to be classed as property rather than a financial resource when you are negotiating your property settlement. This is because a larger property pool will mean there is more to divide between the parties.  If a financial resource exists, that is one of the factors that the court may take into account and determine that it is appropriate to make an adjustment to the other party from the property pool available to be divided between the parties.

There is no “one size fits all” approach when it comes to property settlements.  If you are separated from your former spouse, you are encouraged to obtain legal advice as quickly as possible to ensure that you understand your entitlements, your obligations and so that you can hopefully resolve your property settlement efficiently and amicably. Contact our office to make an appointment with one of our solicitors to obtain advice on your situation on (07) 4963 2000 or through our online contact form below.