The family law courts have the power under s 79 of the Family Law Act 1975 (Cth) to make an aorder altering the interests of parties (including third parties) to a marriage or de facto relationship when it is just and equitable to do so. See Stanford v Stanford. The equivalent provision for de facto relationships in WA is the s 205ZG of the Family Court Act 1997 (WA)). Proceedings seeking such orders are referred to within the profession as property settlement matters.

When the Court decides it is just and equitable to make orders in proceedings for property settlement the court will, as far as practicable, make such orders as will finally determine the financial relationship between the parties to the marriage and avoid further proceedings between them: s 81 of the Family Law Act 1975 (s 90ST in relation to de facto relationships except in Western Australia (WA). The equivalent provision for de facto relationships in WA is the s 205ZJ of the Family Court Act 1997 (WA)).

The court has the power to:

• make a declaration as to the title or rights, if any, that party has in respect of property;

• make orders as to the sale or partition and interim or permanent orders as to possession;

• alter the interest of the parties to the marriage in property;

• make orders affecting the interests of third parties; and

• alter the interest of a bankrupt (if any) in the vested bankruptcy property: s 79(1) of the Family Law Act 1975 (s 90SM(1) in relation to de facto relationships except in Western Australia. The equivalent provision for de facto relationships in WA is the s 205ZG of the Family Court Act 1997 (WA)).

Although there have been many cases which discussed applying a multi-stepped (for many years the profession as a whole described it as a four step process), the Family Law Act 1975 (Cth) itself does not prescribe a particular approach to determining the property settlement entitlements of parties. The only requirement is that orders only be made when it is just and equitable to do so. In previous years this just and equitable requirement was viewed as one of these “steps” (either as a threshold issue or as a last step when considering the form of the proposed orders), however, the preferred view following the case of Bevan is that it is a requirement that permeates the whole process. This is discussed more below under the heading “Just and equitable”.

Although it is not legislatively prescribed, the multi-stepped process is still used by the profession and the Court but with the acknowledgement that its role is confined to helping explain and apply the just and equitable requirement. This is consistent with the comments made by the Full Court in Stanford that the four step process “merely illuminates the path to the ultimate result”.

The multi-staged approach adopted within the profession is often described as follows (note that the order in which the steps are followed does not have to be as described below aside from the requirement that the first step is to identify the property. Without that being the first step, it would be impossible to then assess the contributions of the parties to that property. The following process is described as “Stage 1, Stage 2” etc.) to reflect the most common way family law professionals apply the process).

Identify and value all assets, liabilities and financial resources that each party has an interest in. This stage must be undertaken first as it would otherwise be impossible to assess the contributions of the parties to the property pursuant to s 79(4) of the Family Law Act 1975 (Cth) if the property is not first identified. The definition of property is wide and includes legal and equitable (beneficial) interests whether acquired jointly or separately. It is irrelevant when the property was acquired or how that interest came about). What is relevant is the interests of the parties as at the time orders are being made.

See Identify and value property and liabilities.

Assess the contributions, financial and non-financial, direct and indirect, made by each party to the property of the parties during the relationship. Contributions are not limited to financial contributions (eg payments of mortgage) but include the contributions of the parties as a homemaker and parent as well as indirect and non-financial contributions (eg labour of a party to renovate a property). See s 79(4) of the Family Law Act 1975 (s 90SM(4) in relation to de facto relationships). For WA practitioners, see s 205ZG of the Family Court Act 1997 (WA) for the equivalent for de facto parties.

This stage does not have to be undertaken as a second although it must be done after the identification of the parties’ property. This stage is concerned about looking back to the past — the history of the parties’ relationship and, in cases involving trusts and/or where a party may have made significant initial contributions, much further back to when the interest or property was acquired.

See Contribution of parties.

Assess whether any adjustment/s is/are required to achieve a just and equitable outcome to take into account the matters prescribed in s 75(2) of the Family Law Act (s 90SF(3) in relation to de facto relationships) (or commonly referred to as “future needs” factors). This stage is concerned about looking to the future to assess the extent to which there are factors which may affect the parties’ future financial situation such that there is a significant disparity between them. For example, the list of matters prescribed in s 75(2) (or commonly referred to as “future needs” factors) includes the age, state of health, income earning capacity, property financial resources of each of the parties, the physical and mental capacity of each of the parties for appropriate gainful employment, whether either of the parties has the care or control of a child of the marriage who has not attained the age of eighteen (18) years.

There is nothing in the Family Law Act which dictates that this step be undertaken as a third step, however, in practice this is the approach almost universally adopted by practitioners and the courts and is usually described as an adjustment “to the contributions based assessment of the parties” entitlements. The adjustment is often expressed in percentage terms but does not have to be — it depends on what would result in a just and equitable outcome.

See Future needs.

Before the Court can make any orders altering the interests of parties, it must be satisfied that it is “just and equitable” to do so given the circumstances of the parties’ relationship. Up until 2012, this "step" was usually taken as a final or fourth step and involved an assessment of whether the ultimate outcome reached is, in all the circumstances of the parties’ relationship, just and equitable: s 79(2) of the Family Law Act 1975 (s 90SM(3) in relation to de facto relationships).

However, following the case of Stanford v Stanford some suggested this step to be treated as a pre-requisite or as a threshold issue (ie as a first step). However, the Court in Bevan discussed this issue in detail and provided some guidance by stating that: “the just and equitable requirement is therefore not a threshold issue, but rather one permeating the entire process.” See Bevan & Bevan .

See Just and equitable principle.