The COVID-19 pandemic has affected us all, socially and economically. Despite the Australian Government taking unprecedented steps to stop the spread of the virus, we have already begun to see disruption to the Australian economy and our private lives.
If you have been negotiating a property settlement with your ex-partner, based on information that was accurate at the time, you may find that the evolving impact of COVID-19 has changed the asset pool available for division.
Some of the impacts arising from COVID-19 in the context of a financial settlement include:
Valuations prepared as recently as January 2020 may no longer be appropriate for use in property settlements as changes in the economy may have made them inaccurate.
If you are in the midst of negotiating a property settlement, consider obtaining updated valuation(s) to factor in the current and ongoing impact on business profitability and sustainability.
The impact on your superannuation entitlements may be significant and in turn, may effect any proposal dealing with superannuation. Obtain updated superannuation member entitlements and share prices to ensure that your asset pool is up to date.
In the current economic climate, it may be appropriate to negotiate a superannuation split based on a percentage division rather than a base amount, to take into account the volatility in the market.
If you have lost your job or your income has reduced, you may need to contact the Department of Human Services (DHS) for a reassessment of your child support obligations. For reassessment of your child support obligations as the child support formula takes into consideration, each parent’s current income.
Unless you are proactive in contacting the DHS, your child support obligations may remain the same, regardless of your change in income. Failure to pay a child support obligation will result in the accumulation of arrears and may attract penalties.
Spousal maintenance also takes into account each party’s income and their capacity to meet their own reasonable expenses, and to contribute to any deficit in the other party’s capacity to meet their reasonable expenses.
If you are subject to a spousal maintenance Order, and your income or your capacity to meet your own reasonable expenses has been reduced, then it may be appropriate to seek a variation of a Family Court Order that factors in the change in your financial circumstances.
If you have an existing Binding Child Support Agreement or a Binding Financial Agreement, we recommended that you seek clarification whether the terms of that agreement remain in force, or if they provide for a variation or suspension of the terms, in the circumstances.
The value of real estate may be affected by changes in the economy, domestically and internationally.
Current Government restrictions include a prohibition to conduct public home opens which may extend the period of time it takes to sell a property. It would be wise to consider obtaining updated real estate appraisals and/or valuations. You may also want to take financial advice and consider whether you can hold onto property as a part of your overall settlement, and if viable, whether doing so is desirable.
If a property has to be sold, now more than ever, it may be appropriate to negotiate a settlement based on an overall percentage division, rather than a fixed sum which each party is to retain from the sale, to take into account the uncertain sale price and net proceeds of sale.
Some banks are allowing customers to pause their loan repayments for up to six months if they are experiencing financial hardship. The long term impact of this option on an individuals credit rating is still uncertain.
If you were intending to retain a property and to refinance a home loan, it would be wise to discuss your current borrowing capacity with your financial institution and/or adviser.
In this evolving environment, it is now, more than ever, important to develop a commercial strategy to deal with the impacts of COVID-19 on a family law property settlement. Lavan’s Family Law team are here to give you clarity and help you move towards a resolution in these uncertain times.