Family Law Property Settlement: Typically, there are three significant points of contention in a relationship breakdown. The first is the children, the second is child support. The third one is property settlement.
Family Law Property Settlement Part 1
When your clients separate from their partners, you are usually involved in some shape or form. Your divorcing clients will probably ask you to provide financial statements, copies of tax returns and copies of the relevant ITA and ICA accounts in the ATO portal. And ask you a ton of questions, especially about their position in the family law property settlements.
So, this third point is what Shannon Hilton of Velocity Legal in Melbourne will cover with you in this and the next episode. She will discuss the pool of assets and contributions to this pool, as well as court orders, informal property settlements, binding financial agreements, consent orders, applications out of time, and more.
Here is what we learned, but please listen in as Shannon explains all this much better than we ever could.
To listen while you drive, walk or work, access the episode through a free podcast app on your mobile phone.
Family Law Property Settlement Part 1
Here are three big lessons we took away from this episode.
Property Settlements
Property settlements involve looking at the asset pool. For example, if Bob and Sheila own a house, contributions are assessed retrospectively throughout the relationship. Both financial and non-financial contributions are considered, including ‘homemaker and parenting contributions’. Family violence is now codified into these considerations.
Initial Contributions
Initial contributions are also considered. For example, if Bob contributed $800,000 and Sheila $200,000, courts assess the weight of those contributions in the context of the relationship. External contributions, like gifts or inheritances, are also considered.
Time Matters
Longer-term relationships dilute the impact of initial contributions. The longer ago contributions were received, the less weight they carry, unless they have a significant effect on the current asset pool.
Future Needs
The Court will assess future needs. It will evaluate current and future circumstances, including income, earning capacity, health, childcare responsibilities, and any impact of family violence. Courts also consider wastage due to reckless conduct or liabilities incurred during the relationship, but beware the new Add On rules after the recent Full Court case of Shinohara & Shinohara [2025] FedCFamC1A.
Pre-Relationship Assets
If you owned an asset before the relationship began, it may still be included in the asset pool. The increase in value during the relationship is considered a joint contribution to the relationship. Financial agreements can protect pre-relationship assets or future inheritance assets, provided they are drafted correctly and meet the Family Law Act requirements.
De-Facto Relationships
De facto relationships generally require two years to trigger family law jurisdiction, with exceptions for children, substantial contributions, or registration with the Victorian government.
Spouse Maintenance aka Spouse Support
Exposure to spousal maintenance exists, even in short-term de facto relationships. Maintenance is typically short-term but can be long-term in cases involving health issues. You can contract out of future maintenance claims under certain conditions through a financial agreement.
Financial Agreements
Financial agreements require independent legal advice, proper financial disclosure, and cannot be signed under duress. Timing is critical; agreements can be entered into before marriage or de facto relationships.
They are often used if there’s a disparity in wealth and for second or third (or fourth and so on) relationships. Financial agreements can cover all assets or specific assets, but excluded assets are still considered in the division of the remaining assets.
Protect Future Assets
Even without substantial assets, individuals from wealthy families should consider financial agreements to protect their future inheritances, business interests, and other legacy assets. Once an inheritance is received, it becomes part of the asset pool, and the other party may be entitled to a portion of it.
Protect Gifts and Loans
Financial agreements are rare among young couples because they typically don’t have assets yet that warrant such an agreement. In younger relationships, financial agreements are generally seen when parents are gifting or loaning funds for property purchases. Loan agreements alone are often insufficient unless they have genuine commercial terms. Courts will examine the actual conduct and intention of the parties.
The only way to protect against family law claims on loans is a financial agreement. If that is not possible, the next best thing is a genuine loan agreement with regular repayments, interest, and documentation.
Add Backs
Before the amendments to the Family Law Act 1975 (Cth) in June 2025, if one party had spent or lost funds or property before the separation, the Court would sometimes treat the assets as if they still existed and would include them in the total pool of assets in the balance sheet as an Addback to be then divided between the parties.
In the recent Full Court case of Shinohara & Shinohara [2025] FedCFamC1A, it was held that the legislative amendments made Addbacks no longer consistent with the Act. In its reasoning, the Court clarified that only existing property is to be identified and considered in the balance sheet for division or adjustment between the parties. The Court may still consider the relevance of historical contributions that a party lost or spent, which may be relevant to one or both of the parties’ present and future financial circumstances.
No Pre-Nup, No Loan
Do not loan substantial amounts of money to your children without a binding financial agreement between them and their partners. At least not, if you want to get this loan back.
Parents often think that entering into a loan agreement will be sufficient. In fact, it’s just not. We could have a whole different podcast about gift versus loan and the “Bank of Mum and Dad” from a family law perspective.
If the loan is not on commercial terms, if there are no regular repayments, or if it exceeds the statute of limitations without anyone calling in the loan, the courts tend to look at it as a gift rather than a genuine loan. The only way to adequately protect it is to have a financial agreement between the parties that recognises that the loan requires repayment in the event of separation.
Shannon Hilton of Velocity Legal in Melbourne says,
“I spend a lot of time talking with accountants and financial planners where parents or grandparents want to give money or provide funds to their children or grandchildren to assist, but want it to be protected in the event that they separate. The loan agreements that get drawn up are often less effective than simply speaking to the people who are going to be receiving the money about entering into a financial agreement.”
So, don’t enter into a loan contract. Do a prenuptial agreement instead. That financial agreement can be confined to just the loan. It doesn’t have to include all assets. A financial agreement is generally a better investment of your legal costs than the loan agreement itself.
Example of a Mortgage that doesn’t Protect
Let’s say you lend your child and their partner money to buy a house. You put a mortgage on the house, but don’t require repayments or interest. You might think the money is safe because you have a mortgage on the property. However, it is actually not safe at all because of the legal presumption of advancement.
Legal Presumption of Advancement
There is a legal presumption of advancement, which assumes that when parents advance money to their children, it is a gift rather than a loan. This presumption must be rebutted. Loan agreements, caveats, or mortgages entered onto the title can indicate that it was a genuine loan.
Still, if all other conduct of the parties does not treat it like a loan—no commercial terms, no repayments, and only calling in the loan upon separation—the court will examine the actual intention of the parties.
This often catches parents off guard. Many parents assume their money is safe because there’s a mortgage and a loan agreement. However, if you don’t call the annual interest, the other party to the relationship can claim that they were not aware that the money was a loan. They thought the money was a gift. They were told during family gatherings that it was a gift.
In that case, the family law courts will consider the actual intention.
Loan Agreements Are Good For Lawyers But Not You
Loan agreements are good for lawyers because you first pay a contract lawyer to set it up, and then you pay a family lawyer to defend a flawed setup.
Shannon Hilton of Velocity Legal in Melbourne says,
“Currently, I have four or five matters dealing with loans from parents. The only way to protect such loans is a financial agreement. The best way is a financial agreement; the next best is a genuine loan with commercial terms. It does not have to be the same interest rate as a bank, but regular repayments, even small, and documentation about any delays or adjustments show that it is a genuine loan.”
If you want to give your children money to buy a house, insist on a financial agreement. Additionally, have a loan agreement and insist on regular repayments, including both interest and principal. If you have a gold-standard financial agreement, you don’t need the regular repayments. The financial agreement would enforce the loan.
If there is no financial agreement, the next best option is a proper loan agreement. Seek a solicitor; don’t just write it on the back of an envelope. Complete the paperwork before advancing any money. Ensure both parties are aware of the terms. Include commercial terms and regular repayments.
Changes to the law around Property Settlements
There have been significant changes to the Family Law Act regarding property settlements. The language has shifted from what we would usually discuss. The reforms codify the way case law has applied to financial settlements. There’s also now a spotlight on family violence, considering how it affects contributions to a relationship and current and future circumstances. These changes are significant when compared to the previous law.
Previously, the impact of family violence on a property settlement case required a high threshold to prove. Cases focused on family violence significantly impacting someone’s ability to make day-to-day contributions. Now, the definition of family violence is broader, including economic and financial abuse, coercive control, and financial or economic abuse. Courts now have to consider whether family violence affected a party’s ability to make financial or non-financial contributions, including homemaker and parenting contributions.
And then there is the recent Full Court case of Shinohara & Shinohara [2025] FedCFamC1A, that changed the way add-backs work.
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This is a summary of our first episode about family law property settlement, as we understand it. Please listen to the actual episode, as Shannon Hilton goes into much more detail and explains everything much better. Please consult your Family Lawyer about your personal affairs and don’t rely solely on what we have written here.
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