Three in the bed: You, your de facto, and the Family Court

When the Australian states referred their powers to legislate about the property of de facto couples (same sex and opposite sex) to the Commonwealth at the turn of the decade, the question of what constituted a de facto relationship under the new legislation became the subject of much debate and, consequently, litigation.

The lay understanding of the term “de facto” tends to assume that there is a single identifying factor or test: for example, you have to live together and both be on the lease, you have to be in a relationship for more than two years, or you have to declare your relationship to Centrelink or the ATO.

As is often the case, however, the legal reality of the situation is not so clear cut.

The definition of a “de facto relationship” can be found in section 4AA of the Family Law Act 1975 and in brief requires that:

1. parties to a relationship are not legally married to each other;
2. parties to a relationship are not related by family; and
3. having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.

It is the word “circumstances” in this third point upon which the discussion turns. The legislation goes on to list a number of circumstances that may (but not necessarily) be of relevance:

1. the duration of the relationship;
2. the nature and extent of the parties’ common residence;
3. whether a sexual relationship exists;
4. the degree of financial dependence or interdependence, and any arrangements for financial support, between the parties;
5. the ownership, use and acquisition of the parties’ property;
6. the degree of mutual commitment to a shared life;
7. whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
8. the care and support of children;
9. the reputation and public aspects of the relationship.

Having listed the above factors, however, the legislation goes on to specify that not one of them is a prerequisite for the Court finding that a de facto relationship exists: instead, the importance of each factor should be determined by the Court in the particular “circumstances” of the case.

The effect of these sections is to give the Court a wide ranging discretion to determine each situation as the judicial officer deems appropriate. Understandably, this causes consternation in our mutual clients who often struggle to determine whether or not their relationship should be considered a “de facto”, along with the legal, taxation and other ramifications that such a status brings.

It may seem to go against “common sense”, but recent de facto litigation has shown us that a de facto relationship can, based on the above, be found to exist where one (or both) parties to the relationship is already married to another person, where the parties do not and have not lived together, or even where there has not been any sexual intimacy between them.

While it continues to be an area of law that finds its basis in judicial discretion, the issue of classifying de facto relationships will present a potential minefield for parties and their legal and financial advisors. Armed with knowledge of these pitfalls, however, prudent practitioners will be in a position to ensure that these issues are addressed at a time when asset protection and planning remain an option, and certainly before the horse has bolted and the intimate details of the parties’ personal lives are aired before the Family Law Courts.