Top 10 mistakes people make during property settlement and how to avoid them

Property settlement is the legal process of dividing assets and liabilities between separating or divorcing parties under Australia’s Family Law Act 1975. This stage is critical to ensuring long-term financial fairness but is often mishandled due to misinformation, emotional stress, or lack of legal guidance. From undisclosed superannuation to informal agreements that aren’t legally binding, errors in property settlement can delay proceedings or result in unjust outcomes. This guide outlines the top 10 property settlement mistakes and explains how to avoid them through legal compliance, accurate asset valuation, and professional support.

Property settlement after separation or divorce can be legally and emotionally challenging. It is easy to make simple mistakes along the way, which could lead to the settlement being inequitable, unresolved or timely. This blog will explain 10 common mistakes made during property settlement and simple ways in which you can avoid them.

1. Failure to disclose assets

One of the most detrimental mistakes you could make during your property settlement is not providing full and frank disclosure of all your assets and liabilities. A failure to be transparent can lead to settlement agreements being set aside, particularly as you will not be considered a credible witness in Court. 

How to avoid: Be honest and transparent about your financial situation during the settlement process. You should not only disclose tangible assets such as real estate or vehicles you may own, but also disclose intangible assets like investments, bank accounts and superannuation. Also ensure you provide, and have access to all necessary documentation so that a fair and equitable property settlement can be achieved in a timely and cost-effective manner.

2. Not knowing the value of your assets

As well as disclosing your assets, it is also important that you know of their value. Without accurate valuations, your property settlement agreement may not reflect your true entitlements. This is so you can achieve a fair settlement, especially as disputes may arise where values are contested.

How to avoid: Ensure you gather all financial documentation regarding the value of your assets. You may also need to obtain independent valuations for significant assets, particularly as courts favour professional valuations.

3. Not Formalising Agreements Through Consent Orders or a Binding Financial Agreement

If you make an informal settlement agreement, this will not be legally binding. This becomes an issue if the other party seeks to change the agreement in the future. How to avoid: Engage a Property settlement lawyer who can assist in drafting formal agreements and make them legally binding. This is by applying for Consent Orders made by the Court or drafting a Binding Financial Agreement. These will help ensure finality and will prevent one party from seeking further claims.

4. Underestimating future needs

Under sections 75(2) and 90SF(3) of the Family Law Act 1975 (Cth), the Court must consider your future needs when determining a fair and equitable property settlement. Therefore, it is important that you assess your long-term financial security, particularly if you care for children or other dependent family members. Failure to consider needs such as retirement or education expenses can result in an inequitable settlement. Courts must consider your future financial needs under the Family Law Act such as childcare, housing, and retirement.

How to avoid: Ensure you assess the above mentioned needs or gain assistance in doing so. This could be from a family lawyer or from a financial advisor who can assist you in creating a post-divorce budget and strategy. This will ensure the property settlement is inclusive of your future needs.

5. Ignoring tax implications

Always seek tax and legal advice to understand capital gains tax, stamp duty exemptions, and superannuation rollover rules during settlement.

It is important to understand the tax implications of asset division, including Capital Gains Tax and stamp duty. This is to ensure neither party is left with unexpected financial burdens after the settlement is finalised.

How to avoid: These implications can be mitigated if your property transfer is part of a formal settlement. Engaging a family lawyer will also help, particularly as they can provide advice on these implications and how to structure agreements so you can minimise tax liabilities.

6. Ignoring superannuation in property settlements

Superannuation is often one of the largest yet most overlooked assets in a property settlement. Under Australian family law, you may be entitled to a superannuation split. Superannuation is an asset that is typically overlooked and undisclosed in property settlements. However, it is equally as valuable. A failure to disclose it may result in an unfair settlement.

How to avoid: Ensure you include your superannuation balances in your financial disclosure. A family lawyer can also help you understand your rights to superannuation splitting in NSW.

7. Agreeing to an unfair settlement

It is important that you do not feel pressured to agree to a settlement that is not in your best interests. This may mean that the settlement will not be fair and equitable for both parties.

How to avoid: It is best to engage a family lawyer who will act on behalf of your interests. You can also consider going to mediation where a mediator can assist in reaching a fair agreement.

8. Rushing through agreements without review

It is understandable that you may wish to finalise your divorce process quickly. However, this can lead to the parties accepting agreements without fully understanding them. This will prevent a settlement that is not fair or equitable.

How to avoid: Engage a family lawyer who will act on behalf of your interests and assist you in understanding the terms of your settlement agreement, before you sign anything.

9. Emotional decision making

It can be easy for your emotions to dictate decisions in property settlements. This can lead to unfair outcomes which you may regret later on.

How to avoid: Approach property settlement negotiations rationally and with an open mind. It is best to work with an objective family lawyer to focus on long-term goals. Additionally, it is a good idea to seek counseling or support services to assist in regulating your emotions surrounding divorce and separation.

10. Not seeking professional help

Engaging a family lawyer is the best decision you could make when looking to finalise your property settlement. If you seek guidance from someone who is not legally qualified like a family member or friend, you will not get the assistance you need to protect your interests.

How to avoid: Engage a family lawyer as early as possible. This will ensure your settlement is handled properly and that your interests are protected throughout the process. They will provide objective advice based on legal principles rather than emotions, which will help separate your emotional reactions from financial decisions.

Conclusion

Reaching a fair and legally binding property settlement doesn’t have to be stressful. By avoiding these common mistakes and getting advice from a specialist family lawyer in Sydney, you can protect your financial future and ensure your settlement complies with Australian family law.

Following these tips will ensure that you agree to a property settlement that is fair and equitable and that the process in doing so is cost and time effective. If you need assistance in reaching a settlement, speak with one of our specialist family lawyers today.