De facto relationships are increasingly common in Australia, but many couples may not fully understand the legal and financial implications. While these relationships share similarities with marriage, they come with unique responsibilities and challenges, particularly when it comes to financial planning and legal rights. Understanding how to navigate these aspects can help couples build a secure future together and avoid potential disputes.
What are De Facto Relationships?
The Family Law Act 1975 Sec 4AA defines de facto relationships as couples of opposite-sex or same-sex who are not legally married or in a civil union but are actually living together. They must not be biologically related. The rule also applies to de facto couples where one person has another de facto relationship or are actually married; the court, if need be, may have to determine if the married person has domestic issues with their spouse that warranted the de facto relationship.
The Family Law Act 1975, Sec 4AA, Part 2 also mandates, among others, that the couple themselves have the capability to use their own financial resources and show their commitment to a mutual shared life. As such, effective management is crucial for them to ensure financial security and avoid disputes.
Some key reasons why de facto couples should prioritise financial planning include:
- Avoiding misunderstandings – Clearly defined financial roles and responsibilities help prevent conflicts.
- Ensuring fair asset division – A well-structured financial arrangement can simplify matters if the relationship ends.
- Legal protections – Establishing financial agreements can safeguard both partners’ interests.
Financial Communication and Planning for De Facto Couples
Open and Honest Communication
Transparency is key when dealing with finances in any relationship. De facto couples should regularly discuss their financial situation, including income, expenses, savings, and debt. Establishing shared financial goals can help create a sense of teamwork and trust.
Joint vs. Separate Finances
Couples must decide whether to combine their finances, keep them separate, or take a hybrid approach. Options include:
- Fully joint accounts – Useful for managing shared expenses like rent, bills, and groceries.
- Separate accounts – Each partner maintains financial independence while contributing to joint costs. These accounts may include accounts either partner have had for years, like a former payroll account that has been dormant for years.
- Hybrid approach – A shared account for common expenses while maintaining personal accounts.
Creating a Budget Together
A well-planned budget helps couples track income and expenses while ensuring financial goals are met. Budgeting tools and apps can make the process easier and help de facto couples manage their finances effectively.
Understanding Legal and Financial Rights
De facto couples in Australia should be aware of their financial rights and responsibilities, particularly concerning property ownership, superannuation, and tax obligations. Seeking professional advice can provide clarity on these matters.
Financial Considerations for a De Facto Breakup
A breakup can be financially complicated for de facto couples, particularly when assets, debts, and joint financial commitments are involved. Planning ahead and knowing your legal rights can make the process smoother.
The BFA
A Binding Financial Agreement (BFA) is a legally recognised document that outlines how assets and finances will be divided in the event of a breakup. This agreement can help prevent disputes and protect both parties’ interests. Speaking to ABC’s Laura Lavelle, Tayla Kilkeary, principal solicitor at Avokah Legal, said a well-crafted BFA will take account of all potential situations to aid couples – and they must be both present in assembling the provisions.
Dividing Assets and Debts
When a de facto relationship ends, both partners may need to divide jointly owned assets, including property, savings, and investments, as well as debts accrued. Those assets must be proven to have been acquired during the period of the relationship. The team at Westpac Bank claims that couples who part amicably can work together to split up their assets – but disagreements may force the escalation to Federal Circuit and Family Court of Australia if the division is not done within two years of parting ways.
Cataloguing any debts accrued during the relationship is critical to help the individuals decide how to pay them off going forward. For example, if you bought a plot of land you were intending to build a house on in the future, and there’s still some balance left on the mortgage, who’s paying for it?
Superannuation and Financial Support
The Family Law Act 1975 Part VIIIB will have provisions on de facto partners’ entitlement to the other partner’s superannuation or financial support, depending on the circumstances. Part VIIIC covers treatment of superannuation for couples in WA. Consulting with a family solicitor can clarify rights and entitlements.
Updating Papers
After a breakup, it is important to update financial documents, such as wills, insurance policies, and beneficiary nominations, to reflect the changed relationship status. Some people may also recommend immediately updating access credentials for bank accounts to prevent rapid pilferage.
Conclusion
It can be a wonderful feeling for two people agreeing to be a couple, whether as a de facto pairing or legal partnership – but that will require deeper maturity, open communication, and care when they have to now manage finances.
Through setting clear expectations and understanding their legal rights, de facto couples in Australia can navigate their financial journey with confidence. In the event of a breakup, having a structured approach to financial separation can make the process less stressful and ensure fairness for both parties.
DISCLAIMER: This article is for informational purposes only and does not replace or supersede official finance and legal advice. 2 Ezi has no business relationships with solicitors mentioned. Please consult a relationship counsellor, civil law solicitor, and financial advisor.
