Division of matrimonial property in Australia - Grania Sheehan and Jody Hughes Research Paper No. 25, March 2001
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Division of matrimonial
property in Australia
Grania Sheehan and Jody Hughes
Research Paper No. 25, March 2001
Australian Institute of Family Studies© Australian Institute of Family Studies – Commonwealth of Australia Australian Institute of Family Studies 300 Queen Street, Melbourne 3000 Australia Phone (03) 9214 7888; Fax (03) 9214 7839 Internet www.aifs.org.au/ This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be reproduced by any process without permission in writing from the Australian Institute of Family Studies. The Australian Institute of Family Studies is committed to the creation and dissemination of research-based information on family functioning and wellbeing. Views expressed in its publications are those of individual authors and may not reflect Institute policy or the opinions of the Editor of the Institute’s Board of Management. National Library of Australia Cataloguing-in-Publication Data Sheehan, Grania. Division of matrimonial property in Australia. Bibliography. ISBN 0 642 39487 3. 1. Marital property - Australia. I. Hughes, Jody. II. Australian Institute of Family Studies. III. Title. (Series : Research paper (Australian Institute of Family Studies) ; no. 25). 346.940166 Designed by Double Jay Graphic Design Printed by XL Printing
Contents
List of tables vi
List of figures vi
Acknowledgments vii
Abstract viii
Introduction 1
Legal framework 1
Current reform agenda 3
The changing context 4
The study 5
Research questions 5
Analytic approach 6
Methods 6
Sample 6
Demographic profile 7
Survey content 8
Methodological problems and conceptual issues 8
Question 1: What is the nature and value of assets on divorce? 8
Measures 9
Findings 10
Type of assets owned 10
Value of assets owned 11
Summary 13
Question 2: What share of property do women and men receive? 13
Measures 13
Findings 13
Percentage share of property received 14
Sources of variation 14
Relative value of share received 16
Summary 18
Question 3: What factors are associated with the division of property? 19
Measures 19
Contribution 19
Section 75(2) factors 20
Relationship context and other factors 20
Analytic procedure 20
Findings 21
Contribution 21
Section 75(2) factors 23
Relationship context and other factors 26
Final model 27
Summary 27
Question 4: What difference would equal shares of the matrimonial
property make? 27
Measures 27
Findings 28
Percentage share of property received 28
Dollar share of property received 29
Summary 30
Research Paper No. 25, March 2001 Australian Institute of Family Studies vSummary of findings 30
Nature and value of the assets on divorce 30
Shares of property at distribution 31
Factors of influence 31
Impact of equal share 31
General discussion 31
Financial contributions count 32
Children first 33
Financial circumstances at separation 34
Conclusion 35
References 36
Cases 37
Appendix A: Demographic profiles of divorced respondents 38
Appendix B: Factors related to the share of property received by the
wife: Significant results from the analyses of variance with multiple
classification analysis 39
List of tables
Table 1.1 Combined assets and liabilities of couple: percentage of
respondents who reported owning assets and liabilities of
different types at separation 10
Table 1.2 Percentage of respondents who reported owning assets and
liabilities of different types by level of asset wealth 11
Table 1.3 Median net value of assets and liabilities 11
Table 1.4 Median net value of assets and liabilities by asset wealth 12
Table 3.1 Mean percentage share going to the wife, by contributions
factors and gender 21
Table 3.2 Mean percentage share going to the wife, by future needs
factors and gender 24
Table 3.3 Mean percentage share going to the wife, by relationship
context, other factors, and gender 26
Table A.1 Demographic profile (percentages) by gender 38
Table A.2 Demographic profile (averages) by gender 38
Table B.1 Contribution factors related to the wife’s share of total property:
Significant results from the analysis of men’s and
women’s reports 39
Table B.2 Future needs factors related to the wife’s share of total property:
Significant results from the analysis of men’s reports 39
Table B.3 Factors related to the wife’s share of total property: Significant
results from the final analysis of men’s reports 39
List of figures
Figure 2.1 Wife’s share of property 14
Figure 2.2 Wife’s share of property by asset wealth group 15
Figure 2.3 Mean percentage share of assets to the wife: basic and
non-basic, by asset- wealth group 16
Figure 2.4 Ratio of men’s and women’s estimated annual income from
share received to post-divorce annual income 17
Figure 4.1 Median percentage share of assets to the wife, by type of
settlement outcome and asset wealth 28
Figure 4.2 Median dollar share of assets to the wife, by type of
settlement and asset wealth 29
vi Australian Institute of Family Studies Research Paper No. 25, March 2001Acknowledgments First and foremost, we would like to thank the hundreds of respondents who volunteered much personal information about themselves, their property, and their post-divorce circumstances. Most respondents did so in the hope that this information would make a difference to the lives of others. We would also like to acknowledge the late Dr Kathleen Funder, who was responsible for the conceptualisation and development of the Australian Divorce Transitions Project, on which this study is based. We are indebted to Patrick Parkinson, Ruth Weston and Stephen Bourke for their comments on drafts of this paper. Several Institute colleagues also provided useful criticism and encouragement, particularly Belinda Fehlberg and David Stanton, and we are also grateful to Bruce Smyth for his contribution to the methods section. We, of course, take full responsibility for any shortcomings in the paper. Research Paper No. 25, March 2001 Australian Institute of Family Studies vii
Abstract The way property is divided on divorce is a key issue for many families, and one that has attracted considerable debate over the past two decades. Yet despite the importance of property division to parties negotiating the divorce transition it has been more than a decade since broad-based empirical research on this issue has been conducted in Australia (i.e., Settling Up, McDonald, 1986a). To address this gap in the research, data from the Australian Divorce Transitions Project are analysed to provide an insight into the way in which women and men are dividing their property when they divorce. The Australian Divorce Transitions Project is a random national telephone survey of 650 divorced Australians conducted in late 1997 by the Australian Institute of Family Studies. The survey includes information on private settlements as well as those settlements that were judicially determined. Drawing on these data a number of specific issues are explored including the nature and value of the assets on separation of women and men. The share of property women and men receive at settlement is also examined, as is the extent to which the various contributions and factors specified under s 75(2) of the Family Law Act contribute to the share of property received. The final issue examined concerns the extent to which women and men would be worse (or better) off under a system of property division that results in equal shares being allocated to the husband and wife. In essence, the data suggest that little has changed since the publication of Settling Up in the way matrimonial property is divided. The way women and men divide their property on divorce primarily reflects financial contributions to the marriage, and concern for the future welfare of the children. To this end the principles that govern the division of property in Australia are consistent with the law. The future financial needs of the former spouse may, however, have been overlooked by parties when allocating property on divorce – a shortfall that, in part, reflects the constraints imposed by the limited wealth available to a large minority of couples on separation. viii Australian Institute of Family Studies Research Paper No. 25, March 2001
Division of matrimonial property
in Australia
Introduction
The aim of this Working Paper is to draw on recent data from the Australian
Divorce Transitions Project to provide an insight into the way in which women
and men are dividing their property when they divorce. The Research Paper
provides an empirical analysis of matrimonial property division in Australia,
rather than a legal analysis. A number of specific issues are explored including
the nature and value of the assets on separation of women and men. The share
of property women and men receive at settlement is also examined, as is the
extent to which the various contributions and factors specified under s 75(2) of
the Family Law Act contribute to the share of property received. The final issue
examined concerns the extent to which women and men would be worse (or
better) off under a system of property division that results in equal shares being
allocated to the husband and wife.
Before turning to the methods of the survey and a detailed account of the
findings, the research needs to be placed in a broader context. In the first section
of the Research Paper a brief outline of the legal framework for property division
in Australia is provided. This is followed by a discussion of current proposals for
reform and a brief outline of relevant policy and socio-demographic changes
that have occurred over the past decade that may have impacted on the way
property is currently divided on divorce.
Legal framework
The Australian system for dividing the matrimonial assets on divorce is a ‘separate’
property regime. On separation, the starting point when dividing property is that
each spouse retains ownership of the property legally theirs. This is, however, only
a starting point. Under the financial provisions of the Family Law Act 1975, the
Family Court has the discretionary power to alter parties’ property interests on
marriage breakdown if it is satisfied that, in all the circumstances, it is just and
equitable to make the order. Exercising this power requires the court to consider
the parties’ respective contributions to the property and other factors under s
75(2) including their future financial needs. Where spousal support is sought in
addition to a property order, it becomes the final stage in the process.
More specifically, when dividing the property the court is directed to take
account of the financial and non-financial contributions made to the property
and to the welfare of the family. Non-financial contributions in particular
include any labour that may have increased the value of the property as well as
contributions made to the welfare of the family through unpaid work at home
and care of the children (FLA s. 79(4)).
In theory the task of dividing property based on the parties’ respective
contributions appears simple. However, in practice there are clear difficulties
involved in comparing contributions which are fundamentally different from
Research Paper No. 25, March 2001 Australian Institute of Family Studies 1one another (Parkinson, 1999). In the case of non-financial contributions, there
are also difficulties involved in placing a monetary value on the contributions
made.1 This particular concern has attracted the considerable attention of law
reformers over the past two decades,2 some of whom have recommended
restricting judicial discretion in evaluating contributions by introducing a
starting point of equal sharing in the value of the matrimonial property - a
starting point that is based on the principle of equal contribution by the parties
to the property of the marriage.
Having determined the respective shares of property based on these
contributions, the court is then directed to make an adjustment to take account
of other factors including the future needs of each of the parties. The estimation
of future need is based on factors or circumstances of a broadly financial nature
such as the age and health of the parties, employment prospects and financial
resources, responsibility for the care of children post-separation and divorce, the
duration of the marriage and the extent to which it has affected the future
earning capacity of the parties. In all, there are 15 largely prospective factors for
consideration covering what each party is likely to need and what each is able to
pay to support the other (the factors are set out in FLA s 75(2)).3
In practice, this second stage in achieving a just and equitable settlement is
frequently employed to take into account the future financial needs of women
and children. Women with dependent children can be at a considerable
disadvantage compared to men in terms of their financial circumstances and
their income earning potential following marital dissolution. In particular,
single mothers and older women living alone post-divorce can experience a
drastic fall in living standards, with many becoming (and remaining) poor,
along with their children (Weston, 1986, 1993).
This economic vulnerability of women post-separation can be attributed to a
combination of social and economic factors, many of which operate independently
of marriage. These factors include women’s weaker position in, and attachment to,
1 Although calculating a monetary value for non-financial contributions is difficult,
efforts have been made to do so. For example see Beggs and Chapman (1988) and more
recently Chapmen et al. (1999), for estimates of the earnings women forgo because of
the need to care for children. There are, however, no current Australian estimates
available of the earnings gained by the breadwinner in having a spouse who stays home
to have and care for the children.
2 The Joint Select Committee of Parliament conducted the first review of property and
family law. In its 1980 report, Family Law in Australia, it recommended consideration of
a community property regime in which there would be joint matrimonial property
(where the parties would be presumed to own property in equal shares) and separate
property. This report was soon followed by an in-depth examination of matrimonial
property law by the Australian Law Reform Commission. This report (Matrimonial
Property, 1987) recommended the retention of the separate property regime with a
starting point of equal sharing in the value of the property of the marriage. This
recommendation was never implemented. The Joint Select Committee proposed a
similar agenda of reform in 1992 in its report, The Family Law Act 1975: Aspects of its
operation and interpretation. The recommendations of this report were later reflected in
the Family Law Reform Bill (No 2) which was released as an Exposure Draft in December
1994. The Bill attracted extensive criticism on the grounds that a starting point of
assumed equal contribution to the marriage as a whole would become a de facto
finishing point of assumed equal entitlement. A revised version of the Bill was approved
by the Senate Legal and Constitutional Committee, and was introduced into parliament,
but lapsed on the calling of the 1996 election.
3 These factors are more broadly referred to by the Family Court as the ‘s 75(2) factors’ - a
label that recognises that this adjustment is not only made on the basis of future
financial need. Any other fact or circumstance of a broadly economic nature, which in
the opinion of the court the justice of the case requires, can be taken into account (FLA
s 75(2)(o)).
2 Australian Institute of Family Studies Research Paper No. 25, March 2001the labour market (Funder, 1986b; Wolcott, 1997) and their relatively lower earnings compared with similarly aged men (ABS, 1998; Bryson 1996). Other factors, by contrast, relate more specifically to the roles that women adopt during and after marriage (Funder, 1986b). For example, during marriage the couple may decide that the husband’s income earning capacity will be promoted while the wife assumes greater responsibility for caring for children and home making. Given the needs of children and men’s usually higher earning capacity, this arrangement can work well – unless the marriage ends. On separation the costs of this division of labour during the marriage, such as loss of immediate earnings and reduced ability to earn and income in the future, place these women in economically precarious circumstances post-separation and divorce (Funder, 1992; 1993). While simplified here, the detailed financial provisions that govern the allocation of property on divorce are inherently complex and there is broad scope for disagreement amongst the judiciary and the parties themselves as to the interpretation of these provisions (Parkinson, 1999). This is not surprising given that the law confers such wide discretion in settling property matters. In addition, the law guides parties’ actions at a time in their lives when they are under considerable emotional and financial stress, and at a time when mutual consideration for one another’s welfare and due recognition of their respective contributions to the marriage may no longer be the norm (Grote & Clark, 1998). In such an environment, dividing property on divorce is a difficult task, and one which is made even harder for the sizeable minority of women and men who settle their property matters without formal legal representation (Dewar, Smith & Banks, 2000). There is, therefore, potential for discordance between the provisions of the law described above, and the application of these provisions by women and men who ‘bargain in the shadow of the law’ (Mnookin & Kornhauser, 1979). The extent to which there is a match between the way women and men divide their property and the provisions of the law, is one of the issues that this Research Paper will address. Current reform agenda A recent Government discussion paper on property and family law reform, the content of which is summarised below, provides the platform for the Federal Government’s current reform agenda for property and family law. In March 1999 the Government issued the discussion paper, Property and family law: Options for change, outlining a number of options for property division reform. The two options for reform that were presented in the discussion paper include a continuation of the current separate property regime but with a presumptive starting point of equal sharing based on the assumption that each party has contributed equally to the property. Under this option the Court would retain discretion to depart from equal sharing to recognise either disparities in past contributions or in future needs. The second option was a more radical proposal in which property acquired during the period of the relationship would be classified as ‘community property’ to which each party would have an equal entitlement on marriage breakdown. Under this second option departures would also have been allowed on the basis of future needs or compensation for loss of income (or earning capacity) arising from the marriage. The discussion paper also proposes that superannuation would be dealt with in accordance with the terms of the government’s position paper released in 1998, Superannuation and Family Law: A position paper, (Attorney-General’s Department, 1988). Since the release of this paper, legislation has been introduced into parliament to permit the division of superannuation on divorce. The Family Law Research Paper No. 25, March 2001 Australian Institute of Family Studies 3
Legislation (Superannuation) Bill 2000, if enacted, will amend the Family Law Act 1975 and the Superannuation Industry Supervision Act 1993, to provide for the division of superannuation interests on marriage breakdown. The way in which superannuation entitlements are to be divided will, however, be dependent on the model of property division adopted (see Dewar, Sheehan & Hughes, 1999 for further discussion of family law reform and the treatment of superannuation on divorce). The Government called for submissions on the merits of these proposed options, yet left open the possibility of adopting other models of reform that the community believes would be of benefit. In a speech to the National Press Club on 27 October 1999, the Federal Attorney- General reported the outcome of consultations on this paper. In essence, the Attorney-General reported that neither option had received significant support. Instead, “the submissions overwhelmingly supported the retention of the status quo, with some minor modifications” (Attorney-General, 1999:10). Thus, while no major reform of the current property regime will be undertaken, there will be some “tidying up” of the current provisions. In particular, minor amendments are planned that will clarify the factors to be considered in property and spousal maintenance proceedings. The s 75(2) spousal maintenance factors will be separated from the provisions governing property division and a discrete set of factors for the operation of s 79(4) will be devised that includes a modified version of the current s 75(2) factors. The exact nature of these modifications is not yet known. Given that the Federal Government is in the process of reforming property and family law, it is considered timely to have available up-to-date data on the ways in which couples divide their property on divorce. Few approaches enable nationally representative estimates to be obtained of both court ordered and registered agreements and private arrangements, and for this reason the Australian Divorce Transitions data are significant. Such information is necessary to inform the reform agenda and to provide a baseline against which any corresponding change in the way property is divided can be later evaluated. The changing context A further reason why up-to-date information on property division is needed is that more than a decade has passed since research on the division of property that covered both privately negotiated and judicially determined settlements was conducted (i.e., Settling Up). Since that time there have been a number of broad-based policy, economic and demographic changes in Australia that may have influenced the way in which property is divided. One of the core changes has been the introduction of the Child Support Scheme (collection in 1988 and assessment in 1989). This is a major legislative reform that has arguably reduced the need for the day-to-day support of children to be taken into consideration in property proceedings. In addition, recent research suggests that the Child Support Scheme has ameliorated the post-separation financial position of some mothers with dependent children. Drawing on data from the Australian Divorce Transitions Project, Smyth and Weston (2000) found that for a small group of resident mothers whose main source of income was wages, child support lifted their financial resources above the Henderson poverty line (Smyth & Weston, 2000: 14). Another core change is the continued growth in women’s workforce participation prior to and during marriage, particularly in the area of part-time and casual employment (Wolcott, 1997; Office of the Status of Women, 1999). Concomitant with increases in women’s educational attainment (Norris & Wooden, 1996), these kinds of changes may have increased women’s financial contribution to the matrimonial property and the welfare of the family. It may 4 Australian Institute of Family Studies Research Paper No. 25, March 2001
also have improved their chances of being in, or finding paid work when the marriage ends, thereby reducing the economic toll of separation and divorce. In addition, changes in fertility and the nature of relationships may also imply some mitigation of the economic costs of separation and divorce for women. The increasing tendency for couples to live together before marriage, to marry at a later age, and have fewer children (de Vaus, 1997a; 1997b), are demographic shifts that may extend the period of time in which women lead financially independent lives. This may also result in increased contributions by women beyond the domestic assets of the marriage (such as the family home), and their greater financial resilience following separation and divorce. However, this is not to say that the adverse economic consequences of divorce for women have all but disappeared. Drawing on data from the Australian Divorce Transitions Project, Weston and Smyth (2000) found that sole mothers, and women from long-term marriages who live alone, are still more likely than men to experience financial hardship after divorce, and the hardship they experience is considerable. The study Research questions The rationale for the study now considered emerges from the discussion above. In particular, property division remains a key issue for women and men during the divorce transition. Further, there is clearly a need for up-to-date information on the division of matrimonial property in Australia given the presence of major policy, economic and demographic change, as well as the possibility of legal reform. The Australian Divorce Transitions Project was set up in response to this and other gaps in current research. An important aspect of the project survey, therefore, was to ask detailed questions concerning the nature of, value and distribution of property amongst divorcing women and men, the extent of financial and non-financial contributions made, and the financial needs of women and men post-separation and divorce. The answers to these questions can provide a clearer sense of the ways in which property is currently divided, and how trends in the division of property have developed, if at all, since earlier studies. On the basis of the above considerations, the Australian Divorce Transitions Project data were analysed within the framework of the following research questions: 1. What is the nature and value of the assets on separation of men and women? 2. What share of property do men and women receive at settlement? 3. What factors are associated with the division of property? 4. What difference to the share of assets received would have been made if assets attributed to the period of marriage had been split equally? The first question allows us to test the hypothesis that the majority of women and men who divorce have limited asset wealth with which to make adequate provision for the future financial needs of the respective parties. The second and third questions involve an examination of the share of property women and men receive, and the re-examination of the factors that were found to influence the nature of property settlement in Settling Up – that is, the extent to which the various contributions and needs specified by the Family Law Act, and other factors, contribute to the share of property received. The fourth question permits some predictions to be made about the potential effects on women and men of equal sharing of the matrimonial property on divorce. Research Paper No. 25, March 2001 Australian Institute of Family Studies 5
Analytic approach
Each research question is first addressed by presenting an average (or aggregate)
picture of property division on divorce. This provides a broad-based view of
property division in Australia. Conclusions drawn from this approach are based
primarily on the circumstances of the majority of divorcing women and men
rather than the minority who take property matters to trial. The findings derived
from such an approach may thus be discordant with recognised advances in case
law in regard to the assessment of contributions and the s 75(2) factors.
‘Aggregate’ information can, however, mask the widespread variability
evidenced in property settlement outcomes (see McDonald, 1986b) and may
reveal little about whether the distribution of property is consistent with policy
goals or legislative intention for particular groups of women and men (Garrison,
1994). To address this limitation of the aggregate approach, each research
question is also explored in relation to specific groups of women and men who
report different levels of asset wealth at separation. This enables an assessment
to be made of the extent to which trends in property division differ for those
with substantial asset wealth on separation – the group most likely settle their
property matters with court assistance – and those with limited asset wealth at
separation – the group most likely to negotiate their settlement privately (Dewar,
Sheehan & Hughes, 1999). Asset wealth also moderates the extent to which the
s 75(2) factors can be relied upon to address the future financial needs of the
respective spouses when dividing property.
Methods
The data presented in this Research Paper are drawn from the Australian Divorce
Transitions Project, a stratified national random telephone survey of 650 divorced
Australians who separated after January 1988, and who lived in all States and
Territories except Western Australia.4 This survey, conducted in late 1997 by the
Australian Institute of Family Studies, examined the divorce transition and its
social and economic consequences for women and men.
Sample
The project was designed to include mainly parents with children under the age
of 18 years at separation, but also some older divorced people, regardless of
whether or not they were parents (though about half of this group had at least
one child under 18 years). Specifically, 513 parents (284 women, 229 men) had
a child under 18 years of age at the time of separation, and 137 were older
women and men (77 women, 60 men) from ‘long-term marriages’ – that is, they
had been married for at a least 15 years duration, and the wife was aged between
45 and 65 years at separation. Though the status of respondents as parents was
not a specific criterion for inclusion in the long-term marriage sample, it is
noteworthy that half the respondents in this sample had at least one child under
the age of 18 years at the time of separation. The older and younger samples
were combined for the analysis presented in this Research Paper. 5
In addressing the respective research questions, a series of core sub-samples were
derived from the total sample described above with the one exception. This
4 The sample was stratified by gender and geographical location (urban vs rural). Western
Australia was excluded due to some differences between the law on child-related issues
in that State and the rest of Australia at the time the interviews were conducted.
5 The samples are not independent because respondents who met the criteria for both
samples were allocated to the long-term marriage sample (that is, the harder-to-obtain
and much smaller sample). For all intents and purposes, however, the samples, when
combined, appear to form a random sample of parents who separated after January 1988
with a dependent child under 18 years old.
6 Australian Institute of Family Studies Research Paper No. 25, March 2001exception was that the complete sample of women and men described above was used to examine the types of assets couples own on divorce (Question 1). All other analyses reported in this paper are based on the three sub-samples described below. First, to examine the value levels of asset wealth at separation (Question 1), all respondents who reported the dollar value of all asset items owned by themselves and their former spouse at the time of separation were included. Second, to examine the share of property received (Question 2), and the factors that influence share received (Question 3), a smaller sub-sample of men and women were used in the analyses. These women and men included those who also: (a) reported the value of all asset items and the corresponding value of the share received by each party, and (b) had a child under the age of 18 years at the time of separation. Restricting this sub-sample to respondents with a child under 18 years at the time of separation ensures that, for each case, the welfare of the children and the future financial needs of the resident parent may have been considered when dividing the property, along with an assessment of any contributions made in the form of caring for the children of the marriage. Third, to examine the effects on women and men of equal sharing of the matrimonial property on divorce (Question 4), a sub-sample of men and women who were married at an early age (i.e., the respondent was younger than 25 years at the time of marriage) and for whom this was their only marriage was used. The women and men included in this third sub-sample were also restricted to those who: (a) reported the value of all asset items and the corresponding value of the share received by each party, and (b) had a child under the age of 18 years at the time of separation. Restricting the sub-sample in this way ensures that, for each case, the property owned at separation is predominantly that which was acquired during the marriage. These three sub-samples all differ from the total sample in terms of the gender breakdown of the respondents. Because women were less likely than men to recall detailed information on the assets of the marriage, particularly the value of their former spouse’s superannuation and the value of businesses and farms, there is a decrease in the proportion of women to men included in all analyses where knowledge of (or willingness to report) the value of assets is required. This gender difference may reflect differences in access to and knowledge of financial information during the marriage (Jordan, Redley & James, 1994). On the remaining demographic characteristics, the demographic profiles of the men and women included in these sub-samples do not differ substantially from that of the total sample. The demographic characteristics of the total sample are now described. Demographic profile Appendix A Tables A.1 and A.2 present the demographic profile of female and male respondents. Appendix A Table A.1 shows that about 80 per cent of respondents were from the younger sample. As a result of stratified sampling, 63 per cent of respondents lived in urban centres, and around two-thirds lived in either Victoria or New South Wales. Most of the others lived in either Queensland or South Australia. Women and men were of a similar age (the mean age of women was 43, and the mean age of men was 49 years), had been married for an average of 14 years, and had been separated for 6 years on average (see Appendix A: Table A.2). Both women and men were most likely to indicate that they had no post-secondary school qualifications (58 per cent vs 46 per cent). Women were less likely than men to report that they had received a diploma or vocational training (18 per cent vs 34 per cent), were less likely to be in paid work (68 per cent vs 78 per Research Paper No. 25, March 2001 Australian Institute of Family Studies 7
cent), and marginally more likely to indicate that they were tertiary graduates (24 per cent vs 20 per cent). Women were also more likely than men to rely on social security as their main source of income (33 per cent vs 12 per cent), to have significantly lower personal and household incomes (for example, median personal annual gross income $20,000 vs $30,000), and to be single (71 per cent vs 58 per cent). These differences are consistent with prior research conducted by the Australian Institute of Family Studies (Weston, 1986; 1993). Survey content The Australian Divorce Transitions Survey contained 12 broad sections: (1) screener questionnaire; (2) marital history; (3) household composition; (4) parenting arrangements (including residence, contact and child support); (5) property division; (6) spousal support; (7) education, training and work history; (8) income; (9) housing; (10) personal wellbeing; (11) personal relationships; and (12) demographic information. Methodological problems and conceptual issues As with most studies of divorce, our data were based on retrospective self- reports. The accuracy of the information is thus dependent not only on respondents’ candour, but on recollections of events that may have occurred many years before and at a time when respondents were under much stress. Three more general methodological limitations should also be noted. First, while the survey design can detect associations (for example, between the share of property received and other factors), it cannot determine the direction of these associations. Thus no claim can be made that certain factors lead to specific property and financial outcomes. Second, the unit of analysis was a spouse – not a couple – from a dissolved marital union; and only scant information was obtained about the respondent’s former spouse. As a consequence, there are limits to checking the accuracy of the data. This also means that we cannot directly determine whether participants took the former spouse’s financial needs into account when the property was divided. We are, however, able to estimate whether women’s financial needs were taken into account when dividing property by testing whether women’s reports of their financial needs post-separation predict the share of property they received. Similarly, an estimate of whether men’s financial needs were taken into account when dividing property can be gained by testing whether men’s reports of their financial needs post-separation predict the share of property they received. Finally, since not everyone is accessible by telephone, the omission of certain groups of people in the population available through telephone surveys sets limits on the generalisations that can be made from the data to the Australian population at large. Among those who are often systematically excluded in such surveys are the very poor, those with unlisted numbers, those who live in geographically remote areas, and those who have hearing or English language difficulties. Question 1: What is the nature and value of assets on divorce? An important first step in the process of reviewing the current operation of the financial provisions of the Family Law Act is to examine the nature of the asset wealth of women and men who divorce; and the extent to which this wealth can be relied upon to ease the financial hardship associated with separation and divorce. 8 Australian Institute of Family Studies Research Paper No. 25, March 2001
Measures
To assess the value of property owned at the time of separation, respondents
were asked about each individual asset and associated liability that they and
their former spouse had at the time of separation. Information was obtained on
the value of each of the following assets and associated liabilities:
1. Bank, building society and credit union accounts;
2. Matrimonial home and mortgage;
3. Furniture, cars, household equipment and amount owed on these;
4. Superannuation policies (value at the time of separation);
5. Life insurance policies (surrender value);
6. Investments such as shares, bonds, debentures or other real estate and
amount owed on these;
7. Businesses or farms and related debts;
8. Other assets with a value of $1,000 or more and the amounts owing on these
assets (such as sporting and household equipment, caravans, boats, jewellery,
musical instruments, paintings);
9. Other liabilities (for example, non-asset related liabilities, such as personal or
private loans, credit card debts).
On the basis of this information, the total net-value for all assets was derived. In
addition, a number of distinctions were made between types of wealth. The net
value of the basic assets of the marriage was calculated, following the approach
adopted by McDonald (1986b: 173-174). Basic assets comprise those assets that
the vast majority of people have, and that are used in day-to-day family life such
as the family home, furniture and cars, bank accounts and non-asset related
debts (such as credit card debts and personal or private loans). This distinction is
based primarily on usage rather than on current practice in family law in
distinguishing between assets for domestic use and other assets when dividing
property.6 The non-basic assets comprise two different kinds of family wealth:
(a) investments such as shares, bonds, debentures or other real estate, and
businesses or farms; and (b) financial resources such as superannuation and life
insurance.
Respondents were categorised according to the level of asset wealth of the
couple at the time of separation. The 1997 social security non-home owner
Pension Assets Test was used to assess the reported net asset wealth levels of the
couple at the time of separation. As all calculations of assets include the value of
couples’ net equity in their home, the test for all assets was used rather than the
test that excludes the value for the owner-occupied home. This involved
deriving the value of the couple’s total net assets excluding superannuation, as
superannuation is excluded from calculation of the 1997 social security non-
home owner Pension Assets Test. This value was then adjusted to 1997 dollars
using the Consumer Price Index to determine whether the real value of assets
was above or below the Asset Test cut off: $268,500. The following three
categories of asset wealth were then created: (a) the high asset wealth group
where asset wealth was greater than the cut off for the assets test (that is,
6 This distinction between basic assets and non-basic assets, it is not a distinction that is
relied on by the Family Court in recent years. The Family Court generally deals with the
assessment of contributions to property on a global basis not an asset-by-asset basis nor
by clustering assets based on usage (Dickey 1997: 682-683).
Research Paper No. 25, March 2001 Australian Institute of Family Studies 9$268,500), (b) the medium asset wealth group with asset wealth valued at
between $114,000 and $268,500, and (c) the low asset wealth group with asset
wealth valued at below $114,000.7
Findings
Type of assets owned
Table 1.1 sets out the type of assets and liabilities owned by the couple at the
time of separation.
Table 1.1 Combined assets and liabilities of couple: percentage of respondents who
reported owning assets and liabilities of different types at separation (n=597).
Type of asset or liability %
Basic assets
Bank & credit union accountsa 81
House, flat 77
Furniture 100
Cars 95
Other basic assets b 46
Non-Basic assets and financial resources
Superannuation 81
Life Insurance 40
Investments 22
Business or farms 24
Non-asset related debtc 34
Notes: missing cases=53 (property division not finalised at the time of interview).
a
Percentage of respondents with money (i.e., credit) in bank, building society or credit union accounts at the time
of separation.
b
Other assets valued at more than $1000 (such as sporting and household equipment, caravans, boats, jewellery,
musical instruments, paintings, etc).
c
Non-asset related debt includes personal loans, credit card debts and overdrafts.
A number of patterns evident in Table 1.1 are of note. The first is the
predominance of superannuation. Around 81 per cent of all cases involved at
least one superannuation policy (usually the husband’s). This represents a
substantial increase on the rate of 55 per cent cited by McDonald (1986b). Such
a finding is consistent with the shift in government policy during the late 1980s
and 1990s towards compulsory superannuation, and represents a marked
change in the composition of the family’s asset wealth, and in couples’
investment priorities (see also Dewar, Sheehan & Hughes, 1999). Aside from this
increase in the importance of superannuation, the general nature of the assets
owned by parties on separation and divorce appears to have remained consistent
with the patterns of asset wealth identified in the early 1980s by McDonald
(1986b).
The type of assets owned by parties at separation is dependent on a variety of
factors, the most obvious of which is the wealth of the couple. Table 1.2 presents
the assets and liabilities of the couple at separation for the three asset wealth
groups.
Not surprisingly, women and men from high asset marriages, and to a lesser
extent those from medium asset marriages, report ownership of a wider range of
assets at separation than women and men from the low asset marriages. The
main differences between the low asset group (46 per cent of the sample) and
the high asset group (21 per cent of the sample) are that women and men from
‘low asset’ marriages rarely report ownership of investments such as real estate
(other than the family home) and shares, businesses or farms. In contrast, just
7 The two ‘low asset’ groups were determined by a median split for those cases where
assets were valued at less than $268,500.
10 Australian Institute of Family Studies Research Paper No. 25, March 2001Table 1.2 Percentage of respondents who reported owning assets and liabilities of
different types by level of asset wealth* (n=389).
Type of asset or liability Low Asset Med Asset High Asset
(n=178) (n=131) (n=80)
% % %
Basic assets
Bank & credit union accounts 68 81 88
House, flat 58 92 86
Furniture 100 100 100
Cars 92 95 100
Other basic assets 40 51 61
Non-Basic assets and financial resources
Superannuation 71 90 82
Life Insurance 25 41 54
Investments 7 23 54
Business or farms 12 24 41
Non-asset related debt 42 35 30
Notes: missing cases=261 (53 cases are missing because property division was not finalised at the time of
interview, 203 cases are missing because incomplete information was provided on the value of asset items and 5
cases are missing because data collection was not complete).
* Wealth is defined as the net worth of the couple adding in the values of all assets and subtracting all debts
(excluding the surrender values of superannuation at the time the property was divided).
over half of the high asset group had investments at the time of separation and
over one third (41%) reported equity in businesses or farms. Further, around half
(58%) of the women and men from the low asset group report equity in the
family home compared with the vast majority (86%) of those from the high
asset group.
Value of assets owned
The reported net value of all assets owned at separation for the vast majority of
respondents (80%) was below the 1997 Social Security Pensions Assets Test. The
median value of net asset wealth as reported by women and men (excluding
superannuation) was $124,101.8 These median property values accord reasonably
well with findings from a recent study of cases finalised in the Family Court
(Matruglio & McAllister, 1999). The median value of women’s superannuation at
divorce was $5,590 compared with $22,361 for men. The median net dollar value
of assets and liabilities of particular types are given in Table 1.3.
Table 1.3 Median net value of assets and liabilities (n=389).
Type of asset or liability $ n
Basic assets
Bank, credit union accounts $2,236 295
Matrimonial home $99,385 294
Furniture, cars & other assets $28,373 389
Non-Basic assets and financial resources
Superannuation $26,152 179
Life insurance policiesa $10,461 89
Investments $40,732 86
Businesses or farms $55,901 81
Non asset related debt $3,638 143
Notes: missing cases=261. All values are adjusted to 1997 dollars using the Consumer Price Index.
Only assets and liabilities with a non zero gross value are included in estimates.
a
Represents the value of all policies held by the husband and the wife at the time of separation.
As McDonald (1986b) found, couples generally had only a very small fraction of
their assets in liquid form (such as money in bank accounts), suggesting that on
distribution, there was generally little ready cash available for either party to buy
8 The sample used to compute this value (n=389) includes 11 cases with a net shortfall on
the total value of assets (excluding superannuation).
Research Paper No. 25, March 2001 Australian Institute of Family Studies 11out the other party’s share of a particular asset, or to set up a second household.
Table 1.3 also indicates that equity in the family home was by far the most
valuable source of asset wealth at separation. However, for most divorcing
couples there is also considerable debt remaining on the family home at the
time of separation (i.e., 78 per cent of couples with equity in the family home
had debt remaining on the family home at the time of separation; and for those
who had such debt, it was worth, on average, 35 per cent of the estimated value
of the family home).
The ability of parties to allocate their property in a way that meets the financial
needs of all parties and preserves the family home for the children is dependent
on both the value and range of asset wealth available at separation –
characteristics of asset wealth that would by definition be most constrained for
those women and men from low asset marriages. Table 1.4 presents the median
dollar value of assets and liabilities of particular types for the three asset wealth
groups.
Table 1.4 Median net value of assets and liabilities by asset wealth* (n=389).
Type of asset or liability Low asset Med asset High asset
(n=178) (n=131) (n=80)
Basic assets
Bank, credit union accounts $1,118 $2,615 $5,575
Matrimonial home $44,721 $120,169 $202,679
Furniture, cars & other assets $21,330 $33,448 $44,870
Non-Basic assets and financial resources
Superannuation $15,878 $28,373 $34,961
Life Insurance Policies $3,864 $9,137 $27,293
Investments $11,149 $28,162 $111,492
Businesses or farms -$2,012 $31,864 $131,236
Non asset related debt $3,865 $3,199 $3,596
Notes: missing cases=261.
Only assets and liabilities with a non-zero gross value are included in estimates.
All values are adjusted to 1997 dollars using the Consumer Price Index.
* Wealth is defined as the net worth of the couple adding in the values of all assets and subtracting all debts
(excluding the surrender values of superannuation assets at the time of asset division).
The data presented in Table 1.4 shows that, a large minority of women and men
(those from low asset marriages) are very limited in the extent to which they can
address the respective parties’ needs. This is because their asset wealth is
primarily tied up in the family home and contents, cars, and in superannuation.
Those in the low asset range have little or no equity in non-basic assets such as
investments. In addition, of the 58 per cent of women and men from low asset
marriages who report equity in the family home, the vast majority (90%)
reported having money owing on the family home at the time of separation –
debt that, on average, amounted to 50 per cent of the estimated value of the
property at the time of separation. This composition of asset wealth – high levels
of debt combined with limited wealth in non-basic assets – suggests that it
would be difficult for these women and men to divide their assets in a way that
would allow both parties access to immediate financial resources post-
settlement, and secure the family home for the resident parent and children.
In contrast, for the high asset group (one in five of the women and men
interviewed) the basic assets and superannuation account for around half of
these couples’ total asset wealth and they have substantial equity in non-basic
assets such as investments. In addition, of the 86 per cent of women and men
from high asset marriages who reported having equity in the family home, 60
per cent had money owing on the house at the time of separation – debt that
accounted for, on average only 20 per cent of the value of that property at the
time of separation. This composition of wealth – low levels of debt on basic
assets and greater wealth in non-basic assets – arguably gives these women and
12 Australian Institute of Family Studies Research Paper No. 25, March 2001men a greater ability to take into account the financial needs of all parties and to
preserve the family home on separation and divorce.
Summary
The findings suggest that around half the women and men interviewed reported
asset wealth at the time of separation, the nature and value of which, when
divided, may not be sufficient to both meet the immediate financial needs of all
parties and the housing needs of dependent children. Nor can this asset wealth
be relied upon to offset any longer-term financial hardship experienced by these
parties post-separation and divorce; hardship that Weston and Smyth (2000)
found to be considerable, particularly for sole mothers. Drawing on data from
the Australian DivorceTransitions Project, Weston and Smyth (2000) found that 44
per cent of sole mothers from short-term marriages through to 59 per cent of
sole mothers from longer-term marriages (i.e., fifteen years or more) had
household incomes below the poverty line some six years post-separation.
Question 2: What share of property do women and
men receive?
In this section the share of property and financial resources that men and
women receive at settlement is considered.
Measures
Where property division had been finalised, respondents were asked to report
the value of all assets and liabilities belonging to themselves and their former
spouse at separation, and the share of each asset and liability that each party
received. To determine the total share of assets received by respondents at
division, the total net value of the assets allocated to the respondent (including
financial resources such as superannuation) was divided by the total net value of
the matrimonial property (including financial resources). This amount was
calculated as a ‘percentage share received’ for each respondent. The percentage
share of basic and non-basic assets received by each respondent was also derived,
and the percentage share of assets received excluding financial resources such as
superannuation and life insurance was calculated.9
Findings
In Settling Up, McDonald (1986b) identified a response bias in women’s and
men’s reports of share received. In particular, parties may underestimate the
share of assets they received and overestimate the share of assets their former
spouse received. Because Settling Up and the Australian Divorce Transitions Project
employed a similar self-report methodology in collecting data on assets it was
expected that this same pattern of reporting would be present in the Australian
Divorce Transitions data. This expectation proved well-founded. Women were
9 These assets were excluded because individuals and the Family Court of Australia are
currently constrained in the way they deal with financial resources, in particular
superannuation entitlements, on divorce. The Family Court only has the power to deal
with property that is owned by the parties at the date of the hearing (Family Law Act,
s.4(1)). Assets that are payable only on retirement, or on some other qualifying event,
are not considered ‘property’ for these purposes, unless that event has occurred and
benefits have been paid (In the Marriage of Crapp (1979) 5 Fam LR 47). The Federal
Government is currently in the process of amending the Family Law act to give the court
a new power to divide superannuation benefits on divorce (see the Family Law
Legislation (Superannuation) Bill 2000). A result of this legal constraint is that, on
divorce, financial resources such as superannuation entitlements often remain with the
party who contributed directly to the fund (see Dewar, Sheehan & Hughes, 1999).
Research Paper No. 25, March 2001 Australian Institute of Family Studies 13inclined to report shares received as roughly equal, whereas men considered that
their wives received a greater share than they did.10
Percentage share of property received
To obtain a general estimate of the total share received (including financial
resources), women’s and men’s reports of the total share received by the wife
were combined. Figure 2.1 presents the distribution of total share received by the
wife for men’s and women’s reports combined.
Figure 2.1 Wife’s share of property (n=193)
100
90
80
70
Per cent
60
50
40
30
20
10
0
0-19% 20-39% 40-59% 60-79% 80-100%
Share to wife
Figure 2.1 shows that 42 per cent of the respondents reported that the wife
received 60 per cent or more of the property. Around one third (29%) of the
respondents reported a division falling in the middle range of 40-59 per cent
share received,11 and around one third (29%) reported the wife receiving less
than 40 per cent of the property. The mean share to the wife is 55 per cent of the
property and financial resources owned at separation.
When financial resources such as superannuation are excluded in the pool of
matrimonial assets, the shares of the total pool received by women are increased
significantly.12 More than half (59%) the women receive 60 per cent or more of
the pool of property when financial resources are excluded, but this percentage
drops to 42 per cent when financial resources are included (see Dewar, Sheehan
& Hughes (1999) for a detailed discussion of this particular finding and the
treatment of superannuation on divorce more generally).
Sources of variation
Given that the shares of property and financial resources received do vary greatly
from a 50:50 split, it is important to consider the possible sources of this variation
in settlement outcomes. It was demonstrated earlier that the wealthier the couple,
the more complex the nature of the assets owned, and the greater flexibility
10 Women reported an average (mean) split of 45 per cent of property to the wife and 55
per cent to the husband, and men reported an average (mean) split of 62 per cent to the
wife and 38 per cent to the husband.
11 The middle range specified here (i.e., 40 – 59%) was chosen because it enables
comparisons to be made between the findings reported in Settling Up (McDonald, 1986b:
183) and the findings presented in Figure 2.1. This particular category is not intended to
represent a ‘rule of thumb’ or standard applied by legal practioners when dividing
property on divorce.
12 t(19)= 8.17, pYou can also read
