What happens to my finances after divorce or separation?

Divorce or separation is an emotionally traumatic and draining experience. As well as this, you and your former partner will be required to make both legal and financial decisions that will have a significant impact on your future. Therefore, it is vital that both parties are informed and aware of what decisions needs to be made as well as the consequences of these choices.

The process of dividing your assets after divorce or a relationship break down is referred to as property settlement. This process changes depending on whether it is a marriage that has ended or a de facto relationship that has ceased. To find out about these differences, it is best to seek legal advice from a family lawyer. The term property includes any assets or liabilities which are owned individually, jointly or under a family trust structure. This could include your family home, money, investments, shares, credit card debts, loans, mortgages or superannuation. The following article will outline the potential outcomes of these decisions and how to best protect yourself in this process.

Legal and Financial Agreements

If you have a financial agreement in place, your financial property will be divided between the two parties according to this document. However, a study by Canstar has suggested that only 6% of married couples in Australia have a prenuptial agreement in place. Having a financial agreement provides couples with peace of mind and is likely to save you both time, stress and money in the long run if the relationship breaks down.

If this is not in place, there are certain steps that can be followed following separation. Couples are encouraged to engage in Family Dispute Resolution or other informal mediation services prior to commencing formal proceedings to obtain court orders. An informal agreement which you reach with your ex-partner is a starting point that does not require a lawyer, however terms within the agreement are not enforceable at law.

A consent order is a court ordered document which formalises any prior negotiations and agreements between the parties around the division of parenting, financial and property arrangements. These must be filed in the Family Court, and you can find out more about this process here.

Living arrangements

A major consideration for most separating couples, is who will remain in the principal place of residence, the family home. Ideally, this decision will involve amicable negotiations and an agreement that is ideal for both parties. If one party chooses to move out, this does not forfeit their rights to the property.

What will I receive?

There is a misconception that all assets are pooled and split equally down the middle. This is not necessarily true. What each person receives will be contingent on the circumstances of each relationship. The Family Court will exercise its discretion based on a range of factors and will divide the property in a way which aims to achieve a just outcome for both parties involved. These factors include:

  • A net pool of assets that considers all current assets and liabilities as well as superannuation.
  • What each party has indirectly contributed to the relationship.
  • Non-financial contributions such as caring for the children at home.
  • Each individual’s future needs including their age, health, super and income.

These factors are not equally weighted, and their respective significance will depend on the specific circumstances. Therefore, it is important to obtain independent legal and financial advice to guide you on this journey and any decisions which may not be made in your favour. To read more about these factors, you can click here.

Spousal maintenance

Another outgoing which may need to be taken into consideration by some parties is spousal maintenance. This is where one party provides the other party with weekly financial support in cases where they are unable to earn income to support themselves. This is determined according to the Family Law Act 1975 (Cth) and will factor in the applicant’s income, expenses and income earning capacity as well as the ability of the supporting party to pay these costs. If you are required to make these contributions to your former partner, it is crucial this is factored into your post-separation expenses.


Both you and your ex-partner’s superannuation is taken into account in the division of assets. The same legislation applies irrespective of separation, and therefore even if you are entitled to a portion of the other person’s super, you will not be able to access these funds until you retire. This division will also take into account the aforementioned factors, and thus it will not be split based only on the financial contributions of each party. If you are receiving a share of the account balance from an existing super account, it is a good idea to become a separate member so that your portion is registered in your name, alternatively it can be rolled over to a separate institution. Regardless of how your superannuation will be split or what you may be entitled to, this can be a complex process and hence, you may wish to engage either a family lawyer or financial adviser to assist you with this process.

Bills and paperwork

It is also important that you clarify what assets you own, both jointly and independently, and organise your bills and paperwork accordingly. If you have joint bank accounts, it is a good idea to start separating your finances. This will involve informing relevant individuals such as your employer of these updates. You may also want to consider closing any accounts which will no longer be held in joint names such as credit cards and insurance policies.

Post separation considerations

Following separation, it is important to understand your new financial position. There are some steps that you can undertake to gain a more comprehensive picture of your circumstances. This may include conducting a budget with your new income and expenses as well as your goals over the short, medium and long term, which are likely to have changed.

If you have an estate plan or powers of attorney, it is vital you consult your solicitor to make any relevant changes in the event of any additional unforeseen life challenges. As well as this, any insurance policies (life, TPD or income protection) should be updated, as the level of cover you require may have reduced. If you require advice on cash flow management, investing, estate planning or insurance you can speak to an EPG Wealth adviser here.



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