Financial Planning for Divorce in Australia

Divorce can be emotionally and financially challenging, requiring careful planning to ensure financial security and independence. 

In Australia, financial separation involves legal, banking, and government processes that can impact one's future. Understanding one's financial obligations and taking proactive steps can make this transition smoother.

Let’s Get Straight to the Point

For those short on time, here’s a quick summary of the key financial steps when separating:

• Organise financial documents – Gather bank statements, tax records, and loan agreements.
• Update accounts and legal documents – Close joint accounts, update beneficiaries, and revise your will.
• Sort out housing and mortgage – Decide whether to sell or keep your home and adjust ownership details.
• Manage income and expenses – Create a new budget and apply for eligible government benefits.
• Plan child support and custody arrangements – Determine parenting responsibilities and legal obligations.
• Be aware of financial abuse – Seek support if you experience economic control.

Now, let’s break it down step by step.

Understanding the Financial Impact of Divorce

Divorce is not just about emotional separation—it also requires financial independence. Financial obligations and legal responsibilities vary based on circumstances, including whether you own property, share debts, or have children.

Legal Considerations for Financial Separation

When separating, it is essential to understand the legal aspects of financial division. Australian family law follows the principle of fair and equitable division, meaning assets and liabilities are split based on fairness, not necessarily on a 50/50 basis.

Key legal aspects include:

• The Family Law Act 1975 – This governs property settlements, spousal maintenance, and child support arrangements.
• Property settlements – Assets, liabilities, and superannuation must be divided fairly between both parties.
• Time limits – Property settlements must be filed within 12 months of divorce if you were married. For de facto relationships, the time limit is two years from separation.
• Superannuation splitting laws – A partner may be entitled to part of the other’s superannuation savings.
• Spousal maintenance – If one party cannot financially support themselves post-divorce, the court may order financial support from the other party.

Understanding these legal principles can help make informed financial decisions during and after separation.

Organising Your Finances After Separation

A financial checklist can help ensure that nothing is overlooked.

1. Gather and Secure Your Financial Documents

You will need various legal, banking, and financial planning documents. These include:

• Bank records – Statements for individual and joint accounts, credit card bills, and outstanding loan documents.
• Taxation records – ATO tax returns, BAS statements (if self-employed), and PAYG payment summaries.
• Mortgage and property records – Ownership deeds, mortgage statements, and rental agreements.
• Superannuation details – Fund statements and beneficiary information.
• Insurance policies – Life, health, home, and car insurance details.
• Debt agreements – Personal loans, credit agreements, or shared financial obligations.

Preparing these documents will assist with budgeting, property settlements, and legal discussions.

2. Close Joint Accounts and Open New Ones

If you have joint accounts, act quickly to separate your finances:

• Notify your bank that you wish to separate joint accounts to prevent unauthorised transactions.
• Open an individual account for income deposits, direct debits, and new financial transactions.
• Freeze joint credit cards if necessary, or close them entirely and divide any outstanding debt fairly.

Banks in Australia generally allow both parties to consent before closing joint accounts so that coordination may be required.

3. Update Legal and Government Records

It’s important to update official records to reflect your new financial status:

• Update your will – Remove your ex-spouse as a beneficiary if applicable.
• Revise superannuation nominations – Many super funds allow binding nominations, which should be changed.
• Notify Centrelink and Services Australia – Your entitlements may change after divorce.
• Update Medicare and health insurance details – Ensure dependents are properly covered.

Failure to update these records could result in unwanted legal and financial complications.

Sorting Out Your Mortgage and Housing

1. Deciding Whether to Keep or Sell the Family Home

Property settlements are one of the biggest financial decisions in divorce. You have three main options:

1. Sell the property and split the proceeds – This is the simplest approach if both parties agree.
2. One partner keeps the property – The other partner is “bought out” or compensated with other assets.
3. Continue co-owning for a set period – Some couples delay selling for stability, particularly when children are involved.

Each option has tax and financial implications. Consulting a property lawyer or financial adviser is recommended.

2. Managing Mortgage Changes

If you are keeping the home, consider the following:

• Refinancing the mortgage – This allows one partner to take full ownership.
• Transferring title ownership – This legally removes an ex-partner’s name.
• Updating repayment responsibilities – Ensure banks recognise who is making repayments.

Failing to clarify mortgage arrangements can lead to legal disputes and financial stress.

Dividing Property, Superannuation, and Assets

1. Understanding What Assets Are Considered

A financial settlement includes:

• Real estate – Homes, investment properties, and vacant land.
• Cash savings – Bank deposits and emergency funds.
• Vehicles – Cars, boats, motorbikes.
• Investments – Shares, bonds, managed funds.
• Superannuation – Retirement savings, which may be split.
• Personal assets – Furniture, jewellery, and valuable items.

2. How Are Assets Divided?

Asset division follows a four-step legal process:

1. Identify all assets and debts – A complete financial picture is created.
2. Assess contributions – This includes financial contributions (income, savings) and non-financial contributions (homemaking, childcare).
3. Consider future needs – Factors such as income disparity, health, and caregiving responsibilities are evaluated.
4. Achieve a fair division – This may be done via mediation or a court decision.

Reaching an amicable agreement through mediation can save thousands in legal fees.

Managing Income and Expenses Post-Divorce

Divorce often means adjusting to a new financial reality, making budgeting and financial planning essential.

1. Creating a New Budget

Managing expenses after separation helps maintain financial stability. Start by:

• Listing income sources – Salary, Centrelink payments, investments, and child support.
• Calculating new expenses – Rent/mortgage, utilities, groceries, school fees, and debt repayments.
• Prioritising essentials – Focus on healthcare, insurance, and loan obligations.
• Building an emergency fund – Aim for savings covering three to six months of expenses.
• Tracking spending – Use budgeting apps like MoneySmart’s Budget Planner to stay on top of finances.

If joint debts exist, close shared credit cards, refinance loans if needed, and contact lenders about repayment options.

2. Government Benefits Available

Post-divorce, you may qualify for financial assistance through Services Australia, including:

• Parenting Payment – Support for single parents raising children.
• Family Tax Benefit (FTB) – Assistance with child-rearing costs.
• JobSeeker Payment – For those unemployed post-divorce.
• Child Support Payments – Managed by Services Australia to cover children’s expenses.
• Rent Assistance – Helps cover private rental costs.

3. Applying for Support

Update your MyGov and Centrelink details, provide income and custody documents, and apply via Services Australia. These benefits can help maintain financial stability while transitioning to independent living.

Recognising and Addressing Financial Abuse

Financial abuse is a serious issue that limits a person’s ability to access money, make financial decisions, or achieve independence. It often occurs gradually and can continue even after separation.

1. Understanding Financial Abuse

Financial abuse can take various forms, including:

• Restricting access to money – Preventing a partner from using bank accounts or giving them an “allowance.”
• Coercing a partner into debt – Forcing loans or credit cards in their name, leaving them financially burdened.
• Hiding income and assets – Concealing financial resources to avoid fair asset division.
• Controlling financial decisions – Making all financial choices without the partner’s consent.
• Preventing employment or education – Blocking job opportunities to maintain financial dependence.

These tactics can make leaving an abusive relationship more difficult, especially if a partner lacks financial resources.

2. Seeking Help for Financial Abuse

There are several Australian support services available:

• 1800RESPECT – 24/7 domestic violence support (Call 1800 737 732).
• Legal Aid Services – Free legal help for financial disputes.
• National Debt Helpline – Confidential financial counselling (Call 1800 007 007).
• Centrelink Crisis Payments – Short-term financial relief for those leaving abusive relationships.

If you’re facing financial abuse, consider:

• Opening a personal bank account to regain control over your finances.
• Seeking legal advice for fair asset division and financial protection.
• Applying for government support to access emergency financial assistance.

Help is available, and taking action today can lead to a financially secure and independent future.

Conclusion

Separation is a major life change, but financial planning can provide stability. By securing finances, understanding legal rights, and updating accounts, you can confidently transition to financial independence. 

Seeking professional advice from lawyers, financial advisers, and government agencies can make the process smoother.

Taking proactive steps today will help you build a secure financial future post-divorce.