How to manage the financial side of divorce in Australia

Separation or divorce is one of the most challenging experiences a person can go through. Along with its impact on family and children, both men and women are also likely to experience negative effects on their mental health and finances.

Words by Shona Henley for BodyandSoul.com.au

Money expert and founder of Ladies Finance Club, Molly Benjamin, who recently discussed this topic on her Get Rich podcast, says that “When you split, you’re suddenly running two households on the same combined income.”

“Rent or mortgage, utilities, groceries – everything doubles just as your cash flow feels most uncertain. On top of that, assets can get tied up while you’re sorting out “who gets what,” leaving you feeling strapped even if you technically have wealth.”

On top of this, there are the legal and professional fees – family lawyers, mediators, property valuations, and accountants.

“And to make it trickier, many women only discover hidden debts or missing disclosures after the break-up. Carolina Arricobene from Lander and Rogers says she sees this all the time, especially when women haven’t had visibility over joint accounts or asset ownership,” explains Benjamin.

The financial impact of divorce and separation is often worse for women than for men

Research, including a study by the Australian Institute of Family Studies, has shown that it’s women going through divorce or separation who often experience the greatest financial impact.

“This situation is often tougher for women because of the gender pay gap, career breaks for caring responsibilities, and generally lower super balances and savings,” says Benjamin.

“Women are more likely to have taken time out of the workforce, which limits earning capacity and can increase their financial needs in the future. If they haven’t been listed on accounts or property titles, they may also be more vulnerable to surprise debts or hidden asset movements.”

Separation and divorce have differing financial effects

The financial impacts of separation and divorce can differ, as each signifies something different legally.

“Separation is simply communicating that the relationship is over. It triggers disclosure duties and the start of property discussions,” Benjamin says.“While divorce is the legal dissolution of marriage, which you can only apply for after 12 months of separation.”

The ‘main event’, Benjamin says, is property settlement.

“Everything goes into one ‘pot’ and the court looks at contributions and future needs before deciding percentages. Super is included and often equalised in longer relationships.”

And “if you’re married, you have one year from the date your divorce is finalised to start property or maintenance proceedings. If you’re in a de facto relationship, you have two years from separation,” she explains.

Financial effects can impact other areas of your life

“Separating and navigating the financial elements also impacts other areas of your life and not just your relationship and wallets,” says Hannah Robinson, Senior Associate at Australian Family Lawyers.

Financial challenges from a separation and divorce often lead to a domino effect, disrupting emotional well-being, physical health, parenting, relationships, work life and long-term security.

“Other aspects include the physical and social factors of one’s life, as well as the future landscaping of a person’s life and plans,” Robinson tells Body+Soul.

Additionally, the mental and emotional impacts can be long-term, including the constant stress and anxiety about financial struggles and worries.

“The depression of separation and financial hardship, as well as the shame and guilt feelings of financial failure and rehousing yourself and potentially children, and the costs involved with this [can also be significant],” Robinson explains.

Taking control one step at a time

But there are steps you can take to help make the difficult process of separation or divorce a bit easier.

“Seek independent legal advice to understand process, entitlements, and options available,” advises Robinson.

“Consider seeking independent accounting or financial advice to assist you in understanding options for negotiating or considering offers, which will also assist in considering setting a new budget, setting new financial goals and plans in the new circumstances.”

Additionally, Benjamin suggests trying mediation before going to court.

“Around 80% of cases settle at mediation, which is usually faster, cheaper, and less stressful,” she says.