How do Special Skills affect Property Distribution?

28 November 2022 in Family and Divorce Law

A property settlement is the formal division of assets following a separation. This process is typically achieved in three stages where the court will:

1. Identify and value the assets of the parties
2. Evaluate the contributions – both financial and non-financial – each party has made to the relationship
3. Consider specific ‘s75(2) factors’ set out in the Family Law Act 1975 (Cth)

The concept of “special skills” comes up in the second stage of the settlement process. “Special skills” are the skills one party has utilised during a relationship to increase the couple’s finances or asset pool. This is different to an “inheritance” or a “windfall” such as a “lottery win.”

The legal principle of “special skills” or contributions was established in Mallet v Mallet 1984, where the High Court found there is no presumption that assets in a marriage will be divided equally between parties, and that each matter should be decided on its merits. There have been cases where the court favours the breadwinner, particularly in high-wealth relationships. For example, in Feraro v Feraro 1993, the court found the husband’s “special skills” increased the value of their combined property.

However, more recent cases signal that this concept is outdated and redundant.

In the case of Hoffman v Hoffman 2014, Federal Circuit Judge Brewster rejected a husband’s claim that his contributions of “skill” and “entrepreneurial flair” should see the couple’s assets split 70:30 in his favour, despite his wife raising their four children and undertaking four decades of paid work. The Judge said the concept of “special contributions” was not part of Australian law. He also said that the case of Mallet v Mallet 1984 was “infected with gender bias” and that it was “offensive” for home-making and child-rearing to be considered “menial” work. In this case, the wife’s significant contributions as a homemaker were not to be treated as less valuable or less important than the husband’s financial contributions.

Today, the court’s general view is that there is no greater weight given to financial contributions than non-financial or homemaker/parent contributions. This is particularly the case in longer marriages and relationships.

Additionally, according to s79(2) of the Family Law Act, in-court settlements must ultimately result in a property distribution that is ‘just and equitable’. Non-legal arrangements and binding financial agreements are not overseen by the court, however, either party may challenge this at a later date based on the principle of ‘just and equitable’ distribution.

The process of property settlement is complex and can have significant financial consequences. It is important to seek expert legal advice.

Brander Smith McKnight’s family lawyers have the legal expertise to guide you through the property settlement process and support you during this difficult process to ensure that you receive your fair entitlement and that any stress you are experiencing does not contribute to a decision you will later regret.

For more information about how property is distributed in a divorce settlement, please see our longer article here.