Family Law Property Disputes: “The Four-Steps Approach”

The Family Law Act, 1975 (Cth) (“the Family Law Act, 1975”) gives the Court the power to decide how to divide parties’ assets in a family law matter considering:

• the contribution each party made to the relationship and
• each party’s “future needs.”

The four steps approach applies equally to married spouses or spouses in a de facto relationship including same sex relationships.The four stages are:

Stage One – “The Pool”

Identifying the assets, liabilities and financial resources including the value of the pool.

Stage Two – “Contributions”

An assessment of the contributions which each party made to the relationship both financial and non-financial.

Stage Three – “Future Needs”

While the term “future needs” is somewhat of a misnomer, at Stage Three, it is necessary to compare the parties’ financial circumstances to ascertain if there should be an adjustment in favour of one as against the other considering their respective circumstances

Stage Four – Fair and Equitable Outcome

The overall outcome must be fair and equitable. The Court will not accept a settlement parties may reach by consent if it concludes that it is not fair and equitable.In every family law property matter it is important to know the “four-steps approach” including to seek to negotiate a settlement.as part of the preparation to make appropriate offers of settlement and in preparation to attend mediation. 

Domestic Violence and the “four-steps approach”

Various recent amendments were made to the Family Law Act, 1975 including in relation to” the four-steps approach”. (3)There are amendments to the key sections of the Family Law Act, 1975 regarding contributions and future needs. These sections are:

• Regarding former married couples – sections 79(4) (contributions) 75(2) (future needs), under Part VIII of the Act; and
• Regarding de facto including same sex couples – 90SM (4) (contributions) and 90SF (3) (future needs) under Part VIIIAB of the Act

One substantial amendment to the Family Law Act will be the additional section 79(4) (ca) which requires the Court to consider:“…the effect of any family violence, to which one party to the marriage has subjected or exposed the other party, on the ability of a party to the marriage to make the kind of contributions referred to in … [the previous sub paragraphs] …”An additional section 90SF(3)(a) (aa) is identical regarding de facto and same sex relationships in Part VIIIAB of the Act.“Family violence” is defined under section 4AB of the Family Law Act. A new section 4AB (2) will expand the definition of “family violence to different forms of financial control and abuse by one party to the other.These amendments to key sections of the Family Law Act, 1975 about property matters will have a significant effect on how the court deals with family violence in property matters in future.

The Attorney General’s media release dated 29 November 2024 states:“The Family Law Amendment Bill 2024 ensures, for the first time, that family and domestic violence can be taken into consideration in property settlements for separating families.Shockingly, family violence is present in 80 per cent of parenting matters before family courts.”Further, he states that the amendments ensure that “…the economic impact of family violence is considered where relevant as part of dividing property and finances.”

The Courts have dealt with family violence cases in property matters in the past and there is authority for the proposition that a victim be compensated as part of the property settlement for the harm caused. (4) However, overall, the Court’s approach to such matters has been historically inappropriate.

The new amendments introducing domestic violence as a key consideration in property matters are the result of the recognition of the problem over decades of the enormous impact that domestic violence has on victims regarding financial and economic outcomes afters separating from a violent relationship. (5)

The Four steps approach in action

Once each party is fully informed about the finances (6) it is important to apply the “four-steps approach” to their case as part of the preparation for negotiations to attempt to settle the property matter.Depending on the facts and the complexity of a particular case, anyone of the four stages may acquire substantial prominence. Some possible examples:

• The parties may dispute the value of an asset or assets in Stage One.
  1. Expert valuers may disagree and be required to meet to issue a joint statement about their disagreement.
  2. Ultimately, the dispute about valuations may need to be decided by a judge at the final hearing.
• A party may fail to disclose an asset in Stage One
  1. Failure to disclose may have serious consequences for the party at fault.
  2. Such failure may also lead to the reopening of the case in future
• The parties may dispute:
  1. the extent of “special contributions” made by one party such as an inheritance, assets a party owned before the relationship and which he/she introduced to the relationship.
  2. The future needs of a party

Two pools

Normally, there are two pools in each case to consider:

• The superannuation pool; and
• The non-superannuation pool.

Superannuation pool

In the majority of cases, the parties’ combined superannuation entitlements are split equally by the Courts by making superannuation splitting orders to that effect.

The non-superannuation pool

The “four-steps approach” normally applies to the non-superannuation pool.An example of how the “four-steps approach” is applied could involve:

• The Court concludes that Party A made the greater contribution because he applied an inheritance, he received three years ago to pay off the mortgage – in Stage Two about contributions the conclusion may be that he is entitled to 55%.
• Party B has the care of three children under the age of 18 years, only recently returned to work after caring for children at home for ten years and there is a substantial salary disparity between Party A and Party B – in Stage Three about future needs the conclusion may be that she is entitled to 10% adjustment in her favour to make it fair and equitable.
• The overall adjustment, therefore, will be 55% in favour of Party B.

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1. See such Full Court decisions as Ferraro [1992] FamCA 64 from [159]; Hickey [2003] FamCA 395 at [39]; and AJO & GRO (Omacini) [2005] FamCA 195 at [46].
2. See also STANFORD v STANFORD (P23/2012). In some cases, the Court must not make any property orders in favour of either party “unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.” – section 79(2) of the Family Law Act, 1975 (Cth).
3. The Family Law Amendment Act 2024 (the Amendment Act) was passed by the Australian Parliament on 29 November 2024 and will come into effect from 10 June 2025.
4. See Kennon [1997] FamCA 27. Also, Benson & Drury [2020] FamCAFC 303 at [35]; Kozovska & Kozovski [2009] FMCAfam 1014 at [73]- [74; Kucera[2009] FMCAfam; Dixon [2011] FMCAfam1244; Martell [2023] FedCFamC1A 71 at [23]-[37].
5. See at https://www.abc.net.au/news/2023-09-17/domestic-violence-victims-family-law-act-dv/102867340
6. Parties are required to exchange all relevant financial information and documentation between them within 21 days of a request eve before Court6 proceedings are commenced –see Schedule 1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021