The Covid-19 pandemic has had dramatic effects on the economy and on people’s lives.
Whilst Australia has been fortunate compared to many other countries, it has still suffered an enormous financial hit, the effects of which may only become fully apparent in the future. Job losses, business closures and stringent restrictions on entry to Australia have resulted in a huge loss to the nation’s economy. Although Australia appears to now be in recovery mode, the impact of the cessation of JobKeeper payments together with ambiguity regarding the efficacy of vaccination means that the future is very uncertain.
Australian family courts (the Family Court and the Federal Circuit Court) have responded to the pandemic by conducting most hearings remotely by way of video-conferencing and telephone. Priority is being given to the most urgent matters (such as cases involving children). Property matters are seen as being less urgent and are often delayed or adjourned at the discretion of a judge.
In this scenario, parties to a family law property matter need to consider the approach they take to the following issues:
1. Superannuation splitting –
As part of a family law property division, superannuation may be divided between parties when a relationship breaks down. Superannuation splitting orders are expressed in either percentage or dollar terms to effect a split.
Although the pandemic initially effected superannuation funds adversely, causing a decrease in people’s superannuation, the share market appears at the moment to have rebounded and superannuation balances to have recovered. However, it is uncertain that the market will continue at its present high level and uncertainty.
In this environment, it is preferable for orders to express a superannuation split in percentage terms rather than as a monetary amount – this means that the impact of any decrease in a superannuation interest is shared between the parties.
2. Spousal maintenance –
If there is a pre-existing order or agreement, and the party liable for the payment of spousal maintenance (the payee) suffers a reduction in income, then the payee may wish to seek that the orders or agreement be varied to reduce his or her liability, at least as an interim measure.
3. Child support –
Similarly, where a party responsible for the payment of child support under an assessment of the Child Support Agency suffers a reduction in income as a result of the pandemic, then he or she should consider applying to the Child Support Agency for a variation of the assessment.
4. Business valuations –
Businesses are normally valued based on their income during the preceding financial year. However, it may be difficult to accurately value a business during the Covid pandemic – the business’ income may have decreased substantially or, alternatively, it may be of the fortunate enterprises which have boomed during this time. In either case, valuations should be approached with caution and take into account the nature of the business, as well as its most recent figures.
5. Sale/valuation of the former family home –
Whilst property values appear to have recovered to a large extent in Australia, there is a risk that they may drop once government stimulus measures such as JobKeeper cease. Sometimes one of the parties may attempt to delay the sale of the home in the hope that the value may decrease – this is often the case where one party wishes to purchase the other party’s interest in the home.
You should ensure that any valuations of the home are up-to-date and it is advisable for the division of the sale proceeds to be expressed in percentage terms rather than a dollar amount, thus spreading any risk.
6. Agreed property settlements –
A change in the financial circumstances of one or both parties due to the pandemic may cause a previously finalized property settlement via court orders or a binding financial agreement to become incapable of being enacted. For example, a party who has lost his or her job due to Covid may not then be able to refinance a home loan as provided for under the agreement reached.
In those circumstances, the parties need to seek legal advice as to their options.
During these difficult times, it may be worth delaying a property settlement until the situation has resolved. However, this is not always possible and if you are considering entering into a family law property division or are already in the process of finalizing a settlement, we recommend that you talk with one of our experienced and compassionate lawyers.
If you wish to obtain some relevant advice, contact us via this website or on 03 9793 5844 to speak with a member of our team.