After a number of false starts under the previous government, at 9:01am on 25 June 2008 Federal Attorney-General Robert McCelland introduced a Bill to amend the Family Law Act 1975 to bring de facto financial matters under the same jurisdiction as marriages. The Bill was passed the Senate on 10 November 2008, the House of Representatives on 11 November 2008 and is now on its way to the Governor-General for her assent.
The Family Law Amendment (De facto financial matters and other measures) Bill 2008 can quite properly be described as one of the most significant changes in relationship law in Australia since the introduction of the Family Law Act in 1975.
For the first time the division of property for de facto couples (be they opposite sex or same-sex) will be decided by uniform legislation and this will take place in the federal courts exercising jurisdiction under the Family Law Act. De facto couples who separate will no longer need to litigate on two fronts, that is, litigation in state courts to divide property and litigation in federal courts regarding parenting arrangements for children.
Too Long In The Wilderness
The Attorney-General has described the Bill in his second reading speech as 'long overdue'. It certainly is. In 2003 the Queensland Parliament passed the Commonwealth Powers (De Facto Relationships) Act 2003. The Act referred powers to the Commonwealth in respect of both opposite-sex and same-sex de facto relationships. The enactment of this legislation was preceded by an agreement between the Commonwealth, the states and territories to refer powers to the Commonwealth.
To date, the following states have referred their powers to the Commonwealth:
- Queensland
- New South Wales
- Victoria; and
- Tasmania
Western Australia has always dealt with de facto matters in the Family Court of Western Australia, an arm of that state's District Court. The Commonwealth has the power to extend this legislation to the Australian Capital and Northern territories.
This leaves South Australia still wandering in the wilderness. The Bill refers to participating jurisdictions and also provides for jurisdictions to participate or withdraw from the scheme at any point.
What's In The Bill?
The Bill is divided into two parts, the amendments to be made to the Family Law Act and transitional provisions.
Much to the annoyance of the State Judiciary, the amendments to the Act will only apply to de facto relationships that breakdown after the commencement of the Bill and there is no provision for matters presently before the State courts to be transferred to the Federal family law courts. Parties who have separated but have not yet commenced proceedings can "opt in" and take advantage of the amendments and access the Federal family law courts.
The most significant change from the previous State based pieces of legislation is that there will now be a right to spousal maintenance on the breakdown of a de facto relationship. This is an extreme departure from the present situation in most States where there is no right to claim maintenance.
This will be a significant problem for some people who have entered into de facto relationships to avoid the rights and obligations of property settlement and maintenance claims that are normally attached to marriage breakdowns. An added complication will arise as the amendments to the Family Law Act now codify the position that you can be married and in a de facto relationship at the same time. It is also possible for a person to find themselves in a situation were they are in multiple simultaneous de facto relationships. This position is nothing new as the Supreme Court of New South Wales has considered this problem as far back as 1989. At present, there is no reported case law on this topic in Queensland.
The Amendments To The Family Law Act
How Can They Do This?
One important question needs to be asked – how is the Family Law Act being extended to de facto couples? The drafters of this legislation have taken into account the problems caused by the Commonwealth Constitution so far as it allows the Commonwealth to the make laws relating to marriage and matrimonial causes. The Bill will insert a definition of de facto financial cause into the existing Family Law Act. By doing this, they have overcome the difficulty associated with the present definition of matrimonial cause.
A de facto financial cause can be:
- Proceedings between parties to a de facto relationship
regarding;
- the division of property between de facto partners; or
- the maintenance of a de facto partner after the relationship has broken down.
The Bill also extends the bankruptcy protection provisions and the splitting of superannuation entitlements already in the Act to de facto relationships. For all intents and purposes, a de facto financial cause will look and feel the same as a matrimonial cause. Upon reading the Bill, it is clear that whilst it amends the Family Law Act, it also duplicates numerous provisions to specifically apply them to de facto property arrangements. It would appear that the Family Law Act will now take on the legislative complexity of the tax law!
How Will Couples Be Able To Access The Legislation?
The Bill imports a number of key concepts that appear in State legislation including the need for the relationship to have existed for at least a period of two years, a child has been born to the relationship or one of the parties to the relationship having made a significant contribution that would amount to a serious injustice if it could not be remedied by a order of a Court.
Declarations About A Relationship
It has been noted previously that there is a difficulty associated with determining when a de facto relationship commences and ends. They are unlike marriages where there is a definitive start to the marriage relationship (characterised by the formal solemnisation of a marriage by an approved celebrant) and a definitive end (the granting of a divorce order by the Federal Magistrates Court).
State legislation (particularly Queensland's Property Law Act 1974) has allowed a Court to determine whether parties have lived together in a de facto relationship and for what period or periods. The Courts have been guided by the decision in D v. McA and the codification of this in the various pieces of State legislation (for instance section 32DA of the Acts Interpretation Act 1954 (Qld)).
The amendments foreshadowed in the Bill take these difficulties into account and have reproduced the factors on which the State courts have previously made their determinations. It is possible that there could now be a wave of applications to the Federal family law courts seeking declarations as whether a relationship exists. This is particularly relevant if a person finds themselves in the middle of multiple partners each making a competing claim against property.
Maintenance And Property Applications
The Bill provides that a de facto partner can make an application to the Court for the division of property or for a maintenance order to be made in their favour on the same terms as that of their married counterparts. The Bill provides for the insertion of particular sections that duplicate the provisions of sections 75 and 79 for application to de facto partners to ensure that there is equality in this respect.
The duplication of the provisions of section 78 regarding declarations will also extend the right of seeking declarations to de facto financial causes. This will be very useful for some litigants particularly where property is held in the name of one de facto spouse and there will be an argument as to the interest the other party has in the property. This is in stark contrast to the days gone by where de facto partners had to rely on constructive trust principles in certain circumstances.
Financial Agreements
The Bill inserts a new Part VIIAB which houses the bulk of the amendments relating to de facto matters. Division 4 of the new Part VIIAB contains the amendments relating to financial agreements. This will, for the first time, provide a uniform law in respect of entering into financial agreements for de facto couples.
Division 4 duplicates the existing provisions relating to financial agreements to enable them to be accessed by de facto couples. The provisions allow (in a similar manner to that as married couples) for parties to enter into agreements relating for property and maintenance:
- before a de facto relationship commences
- during a de facto relationship; and
- at the end of a de facto relationship.
The division also contains provisions to allow previous agreements made under State laws to be considered by the Federal courts on the breakdown of a de facto relationship after the commencement of those provisions. It is important to note particularly when the State agreements at present do not provide for maintenance to be covered. One wonders if there will be some transitional implications regarding the enforceability of these provisions.
Further, the new provisions import the same strict compliance issues that have arisen regarding section 90G and the decision of the Full Court in Black v. Black. In the interim and with the knowledge of these changes, it would be prudent to ensure that all State based agreements that are entered into by clients comply with the same extent as agreements made under sections 90B, 90C or 90D.
Duty And Tax Implications
The Bill extends the exemption of orders of the Court and financial agreements made under the Act from stamp or other State based duties. Again, this is duplication but an important provision as the exemptions from duty do vary from State to State. The Duties Act 2001 (Qld) already contains a provision (s. 422) that provides for no duty to be payable where an agreement or an order of a Court is made in respect of the division of de facto property.
The Bill will make consequential amendments what is known as the "marriage breakdown CGT rollover" to extend the principles to financial agreement made by de facto relationships to ensure that equality is maintained between the two classes of relationships. The present wording of the legislation (particularly subdivision 126 of the ITAA 1997) will be amended to capture de facto relationships.
Australia's Best Value Professional Services Firm - 2005 and 2006 BRW-St.George Client Choice Awards
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
