Guide to the Property (Relationships) Act
The Property (Relationships) Act 1976 sets out rules that apply to property when the relationship between a married or de facto couple ends through separation or death.
Does the Act apply to me?
The Act applies to:
- Married couples, regardless of 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 your relationship for 3 years.
Am I in a de facto relationship?
A de facto relationship is when two people who are both over 18, live together as a couple and are not married to one another. In deciding whether you live together as a couple, the Court will 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 and support of children.
- Who does the household duties.
- What other people perceive the relationship to be.
You do not need to be able to say yes or no to 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 relationship 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 the rules for dividing property?
Normally relationship property is shared equally and separate property is retained by the party who owns it. There are some exceptions to this rule that your lawyer can discuss with you if they apply to your situation.
What is relationship property?
In general, all property acquired by either partner during the relationship is relationship property. This includes your home, cars, and household furniture and appliances. Usually relationship property is shared equally when your relationship ends.
What is separate property?
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. Gifts and inheritances you receive during the relationship are separate property, unless you mix them with relationship property – for instance, where you use inherited money to pay off the mortgage on the family home. Separate property usually stays with the person who owns it. There are some exceptions to this rule that your lawyer can advise you about.
What are contributions to a relationship?
Contributions to a relationship can be either financial (e.g. income) or non-financial (e.g. childcare). It is not presumed that because one partner has made a financial contribution while the other has made a non-financial contribution, that the financial contribution is more valuable.
What about debts?
Debts owed by both parties are relationship debts, whereas debts owed by one party are usually separate debts, as long as they have not been incurred because of your relationship.
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 from a former relationship 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 a contracting out agreement which you can sign before or during your relationship, 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.
Contracting out agreements can specify:
- Whether a de facto relationship exists and when a relationship started.
- If property is separate or relationship property, and the 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, a contracting out agreement must be in writing and signed by each party. A lawyer for each of you must certify that they have explained the effects and implications of the agreement. We also recommend that you each sign a new will, to ensure that your will complies with what you have agreed to.
How do we record our agreement if we separate?
Your lawyer can prepare a separation and relationship property agreement that records how you have agreed to divide your property after you have separated.
To be binding, a separation and relationship property agreement must be in writing and signed by each party. A lawyer for each of you must certify that they have explained the effects and implications of the agreement. We also recommend that you sign a new will.
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 under the Act 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 and do not have a contracting out agreement recording Jack’s 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 a share of Julie’s interest in the 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 investment property becomes the family home, which is relationship property to be shared equally.