When a marriage or de facto relationship ends, determining how to divide the property can be complex. One of the key factors the Family Court in Australia considers is the future needs of each party. This involves assessing the likely financial and personal circumstances each party will face after the separation and adjusting the property settlement accordingly.
Under the Family Law Act 1975 (Cth), sections 75(2) (for married couples) and 90SF (for de facto couples) outline the factors that the court must consider when determining each party’s future needs. These adjustments are made to ensure the settlement is fair and takes into account the long-term financial stability of both parties.
What Is a Future Needs Adjustment?
A future needs adjustment is a modification to the property settlement made in favour of one party because they are likely to face greater financial challenges after the separation. The court has the discretion to award this adjustment if it believes that one party will have significant future needs compared to the other.
Key Factors the Court Considers in Future Needs
The court evaluates a wide range of factors to determine whether a future needs adjustment is necessary. The most common considerations are:
1. Age and Health of the Parties
- Age: The older party in a separation may have fewer years left in the workforce to accumulate wealth and superannuation. For instance, if one party is nearing retirement age, while the other is younger and still able to work for many years, the older party may be entitled to a larger share of the assets.
- Health: If one party has ongoing health issues that affect their ability to work or require significant medical expenses, the court may make an adjustment in their favour. For example, someone with a chronic illness or disability may be less able to support themselves and may need additional financial resources post-separation.
2. Income and Earning Capacity
- Disparity in Income: If one party earns significantly more than the other, this will be an important factor in the property division. For instance, if one party earns $100,000 a year and the other earns $40,000, the court may award the lower-income earner a greater share of the property pool to balance their future financial situation.
- Impact on Career: In many cases, one party may have taken a step back from their career to care for children or support the other party’s career development. If this has reduced their earning capacity, the court will consider this a future need and may compensate the party who sacrificed their career progression.
3. Caring for Children
- Primary Caregiver: The parent who assumes most of the responsibility for caring for the children is likely to have higher future needs, particularly if the children are young. Childcare duties can limit the ability to work full-time or pursue career advancement, which is why the court may make an adjustment in favour of the primary caregiver to account for the financial strain this imposes.
- Child Support: The court will also take into account whether child support is being paid and whether it is sufficient to meet the needs of the children and the primary caregiver.
4. Property and Financial Resources
- Superannuation and Pensions: If one party has access to a substantial superannuation balance or a pension, while the other does not, this will be considered in the future needs assessment. For example, a party with minimal superannuation may be awarded a larger portion of the property pool to ensure they have financial security in retirement.
- Other Assets: Business interests, investment properties, or other financial resources that will continue to generate income for one party are considered. If one party owns a profitable business or significant assets that will provide future income, the other party may receive more of the liquid assets (such as savings or the family home).
5. Living Arrangements After Separation
- New Relationships: If one party is cohabitating with a new partner, their financial situation may improve, which could reduce their future needs in the eyes of the court. For instance, if the new partner has substantial financial resources, the court may decide that the party has less need for a larger share of the property pool.
- Ongoing Financial Commitments: The court will also consider any other financial responsibilities, such as caring for elderly parents or supporting children from a previous relationship. These obligations may increase a party’s future needs.
Examples of How Future Needs Adjustments Are Applied
Let’s look at some examples to illustrate how the court might apply a future needs adjustment in real-life scenarios:
Example 1: Parent Sacrifices Career to Care for Children
- Jane and Tom were married for 15 years and have two young children. During the marriage, Jane was a stay-at-home parent, while Tom worked full-time. After separation, Jane remains the primary caregiver, but her career has suffered as a result of years out of the workforce. She is likely to return to work part-time at a significantly lower salary than Tom’s.
- Future Needs Adjustment: The court is likely to make an adjustment in Jane’s favour, awarding her a larger share of the property pool to account for her reduced earning capacity and the ongoing financial demands of caring for the children.
Example 2: Older Party Nearing Retirement
- Sarah, 60, and David, 45, are divorcing after a long-term marriage. Sarah has health issues that prevent her from working full-time, and she is nearing retirement age. David is in good health and has a stable, well-paying job. Since Sarah is unlikely to return to work and needs financial resources for her medical care and retirement, the court may award her a greater portion of the property.
- Future Needs Adjustment: Given Sarah’s age and health, she may receive a larger share of the property pool, including a greater share of the superannuation or other assets to ensure she has enough to support herself in retirement.
The Court’s Discretion in Future Needs Adjustments
It’s important to understand that future needs adjustments are not guaranteed. The court has discretion when deciding whether to apply these adjustments, and there is no set formula for calculating how much one party should receive based on future needs.
While the factors listed above are considered, the court must also balance them with other elements of the case, such as the contributions each party made during the relationship and whether the proposed settlement is just and equitable. In some cases, even if one party has greater future needs, the court may decide that no adjustment is necessary if other circumstances weigh against it.
Conclusion: Future Needs and Property Settlements in Australia
Future needs adjustments are a crucial part of ensuring that property settlements in Australia are fair and account for the long-term financial well-being of both parties. Whether it’s age, health, income disparity, or the care of children, the court carefully assesses the likely future circumstances of each party to determine whether one party is entitled to a greater share of the property pool.
However, it’s important to remember that each case is unique, and there is no one-size-fits-all solution. Seeking independent legal advice is essential to ensure your future needs are properly assessed and reflected in the property settlement.
For advice on your future needs and property settlement, contact our experienced family law team today to discuss how we can assist you.
