The separation myths that could cost you thousands

Many Australians assume they'll keep the assets they brought into a relationship, that joint debts stay with the person who incurred them, or that an ex can't empty a shared bank account.

In reality, some of the most common assumptions about separation are wrong, and getting them wrong can be costly.

Family lawyer Hayder Shkara, director of Melbourne Family Lawyers and Collective Family Law Group, answers 10 questions that every Australian should understand before a relationship breaks down.

1. When a relationship ends, what does Australian family law take into account when dividing assets and debts?

Australian family law doesn't simply split assets down the middle.

The court considers the financial and non-financial contributions each person made and looks at their future needs.

Contributions can include factors such as how much money you made and whether you came into the relationship with property or superannuation, but it also includes raising children and running the household.

Then the court will decide whether one person will have more of a need for future funds.

For instance, they may have a lower earning capacity or be the primary carer of a child.

The courts will work out how much each person will receive as an overall percentage of the asset pool.

2. What are the best legal tools for protecting personal assets before a relationship or marriage breaks down?

Get a prenup! In Australia we call this a binding financial agreement.

These agreements allow couples to decide in advance how assets, debts and, sometimes, spousal maintenance will be handled if they separate in the future.

When properly drafted and executed, they can remove the uncertainty of litigation later.

3. Do prenups or binding financial agreements really work in Australia? Who should consider getting one?

Binding financial agreements absolutely can work in Australia, but they need to be done properly.

The legislation sets out strict requirements, including that both parties receive independent legal advice.

They can be helpful for couples who simply want certainty.

The key point is that they are a risk-management tool, like buying insurance.

4. What financial mistakes do people make before or during separation that end up costing them later?

One common mistake I see is when one party has very little insight into the financial affairs of their relationship.

They don't know what bank accounts they have, who their accountant is, or understand the bank loans and mortgages they have signed.

When relationships break down, access to documents can quickly become difficult.

Bank records, superannuation statements, loan documents and tax returns are incredibly important later.

5. Will you keep assets you brought into the relationship?

No. There is absolutely no guarantee that you will keep them, in fact, it is more likely to be the opposite.

Over time the significance of those initial contributions can diminish.

If both parties build a life together, raise children and combine finances, the court may view the relationship as a joint enterprise.

The longer the relationship and the more intertwined finances become, the less decisive those starting positions tend to be.

6. Can joint debts follow you after separation?

Debts are treated as part of the asset pool, just like assets.

An important point to understand is that a court order does not change the contract with the lender.

If both names are on a loan or on a credit card, that creditor can pursue both parties.

And they will.

This is why refinancing or restructuring debts as part of settlement is often necessary to truly separate financial ties.

7. What can someone do if they discover debts have been taken out in their name without their knowledge?

The court can consider whether a debt should properly be attributed to one party rather than the other.

If a partner incurred debt secretly and for their own purposes, the court may adjust the property settlement to account for that.

The sooner the issue is identified and addressed, the better.

8. What if you think your partner is hiding money?

If there is a risk that assets are being moved or spent, the court has the power to make urgent orders to preserve the asset pool.

In extreme cases that can include freezing bank accounts or preventing the sale of property.

The key is to act early and get legal advice before the situation escalates.

9. Can your ex empty a joint bank account?

Technically, if both parties have access to a joint account, either of them can withdraw funds.

If this happens, the person who withdrew the money may effectively have it counted against their share.

To avoid this mess, it is best to ensure that upon separation, joint accounts require dual signatures.

10. What happens to the family home if, during separation, one person wants to sell and the other does not?

If the parties cannot agree, the court has the power to order that the family home be sold.

In some situations one party may instead refinance the property and buy out the other's interest.

The court ultimately focuses on what is practical and fair, in particular where children are involved and housing stability becomes a key consideration.

The bottom line

Separation can be emotionally and financially challenging, but understanding your rights and obligations early can help prevent costly mistakes.

Shkara says gathering financial documents, understanding your asset position and seeking legal advice early can put you in a much stronger position if a relationship breaks down.

Get stories like this in our newsletters.