In Family Law property settlements, any debt incurred during a relationship is generally considered a joint responsibility. The Court assumes that financial obligations such as credit cards, mortgages, car loans, tax debts, and HECS/HELP debts, were for the benefit of both parties. However, hidden liabilities – such as gambling debt, extravagant spending, misappropriated funds, or undisclosed tax debts – can significantly affect property settlements.
This issue has recently gained increasing media attention, highlighting the prevalence of financial deception in relationships. Importantly, undisclosed debt and hidden liabilities are recognised as a form of financial abuse, which is considered a type of family violence.
Many individuals only become aware of these debts during property settlement negotiations, leading to disputes over financial accountability. Understandably, it can be quite shocking to discover that what you thought might be an asset pool of say, $500,000, is significantly less because there is a debt in your former partner’s name for half of that amount, which will mean your entitlements are significantly less!
The underlying issue, however, is that undisclosed debt and hidden liabilities are recognised as a form of financial abuse – and financial abuse is one aspect of family violence that goes largely unresolved. Some common examples of financial abuse in intimate relationships include:
- Being forced to deposit money into an account you don’t have access to.
- Having debt created in your name without your consent.
- Being excluded from major financial decisions.
- One party holding assets solely in their name to avoid liability.
- Spending household funds (such as rent money) on personal interests like gambling.
- Hiding significant amounts of money or assets.
A 2019 Australian Law Reform Inquiry found that those affected by financial abuse often struggle to achieve a fair property settlement and may face long-term financial disadvantage.
To address this, the 2024 amendments to the Family Law Act aim to make property settlements fairer and safer. The Court will now consider the economic impact of financial abuse when assessing contributions to the property pool and family welfare. This means:
- The Court can determine whether the debt benefited both parties or was incurred for one party’s sole benefit.
- If a party recklessly or negligently accumulated debt, they may be held solely responsible.
- The Court will assess whether the debt was incurred before or after the marriage, or before or after the separation.
- Wasted assets, such as money lost through gambling or financial mismanagement, can be considered in property division.
These changes flow from the 2024 amendments to the Family Law Act and will take effect on 10 June 2025. At this stage in Western Australia, the changes only apply to property settlements for married couples and will apply to all new and existing cases unless a final hearing has already commenced.
If you are affected by family and domestic violence, or think you may be subject to financial abuse, call 1800RESPECT on 1800 737 732 to access 24/7 counselling and support.
If you want more information about your property settlement, please contact us on 9375 3411 and make a time to see one of our Family Lawyers.
About the Author: Melanie Tonon is one of our Family Law lawyers. She holds a Law Degree from Curtin University and was admitted to the Supreme Court of Western Australia in 2019. Melanie also has a Bachelor of Commerce and a Graduate Certificate in Australian Law and Migration. With experience in various areas of law, she is committed to ongoing professional development and client care.
