Sunday, December 5, 2010

How the Courts Determine Spousal Maintenance For Married Couples

How The Courts Determine Spousal Maintenance for Married Couples

Spousal maintenance refers to maintenance which is payable by one partner to the other partner. A partner to a marriage is liable to maintain the other partner to the extent that they can reasonably afford to do so and if their spouse is unable to support him or herself adequately because:

•he/she has the care and control of a child of the marriage who is under 18 years of age;
•of their age or their physical or mental incapacity for appropriate or gainful employment; or
•any other reason, and having regard to the factors identified in section 75(2) of Family Law Act.

Parties may agree to Spousal Maintenance by entering into Consent Orders which may be made in the Local Court, Family Court or Federal Magistrates Court. If no agreement can be reached, a party may apply to any of these Courts for a Spousal Maintenance Order. The spouse applying for spousal maintenance is the applicant spouse.

Note: The conditions under which Spousal Maintenance is payable to a former partner of a de facto relationship differ from the above, and may vary depending upon which State of Australia you are in.

How Spousal Maintenance is determined

The Court will look firstly to the reasonable needs of the applicant spouse and their capacity to provide for those needs (not taking into account any entitlement the spouse may have to social security). Their capacity to provide is based on their income, property and financial resources. If there is a shortfall between the applicant spouse's needs and capacity, the Court will consider the other spouse's reasonable needs and their capacity to provide for their own needs. If that spouse has surplus capacity of income, property or financial resources after providing their own reasonable needs, the Court will consider how much of that surplus should go to meeting the shortfall of the applicant.

Common situations where Orders for Spousal Maintenance are made
Common scenarios in which Orders for Spousal Maintenance are made include:-

•where a spouse is left with the care of young children restricting their ability to earn an income for themselves;
•where an elderly spouse cannot earn an income due to their age or lack of work experience;
•where there are few assets of the marriage available for division between the parties, and one party has significantly greater income than the other;
•where one spouse requires a temporary Order for Spousal Maintenance to support them until they receive their share of the marital property.

When can Spousal Maintenance be sought?

Spousal Maintenance can be sought at any time prior to a divorce. This includes where the parties have not separated but one spouse is failing to properly support the other. More commonly, Applications are made for Spousal Maintenance after separation. Applications for Spousal Maintenance must be made within twelve months of the divorce orders coming into effect. After twelve months from the date of the divorce, Spousal Maintenance proceedings may only be commenced with special leave of the Court.

Types of Spousal Maintenance Orders

Common types of Spousal Maintenance Orders include:-

•Periodic Order for payment of a specified amount on a weekly or monthly basis: The amount to be paid may increase to reflect increases in the CPI inflation index or other relevant factors. A periodic Order may be final and therefore continue indefinitely or until a specified event has occurred, such as children reaching a certain age. Alternatively, a periodic Order may be interim and only continue for a short period until the matter is further considered by the Court (perhaps on determination of a property settlement).

•Lump sum payment of a specified amount on a one-off basis: The lump sum amount may be a specified monetary amount or through the transfer of property.

Spousal Maintenance and Property Settlement Orders

A Court may Order interim Spousal Maintenance until a final property settlement is reached. The Court will then re-consider whether Spousal Maintenance remains appropriate following the spouse receiving their share of the marital property.

Any transfer of property will be presumed to be by way of property settlement (ie. not Spousal Maintenance) unless the Order specifies it. It is therefore essential that Spousal Maintenance be clearly identified in any Consent Orders. If not, the payer spouse may be disgruntled if the payee spouse subsequently seeks Spousal Maintenance after having already received a benefit that he/she had intended to be Spousal Maintenance.

Varying or ceasing Spousal Maintenance

Spousal Maintenance will automatically cease on the following events:

•death of the recipient spouse.

•death of the paying spouse (unless the Order was made prior to 1983 and was stated to continue for the life of the recipient spouse).

•the remarriage of the recipient spouse, unless a Court orders otherwise (due to special circumstances). There is a duty on the recipient spouse to inform the other on their re-marriage. Payments made after re-marriage can be recovered from the recipient spouse.

A Court can make an Order discharging, reducing or increasing an amount of Spousal Maintenance if it is satisfied:-

•there has been a change of circumstances of either party since the Order was made.

•since the Order was made the cost of living has changed to justify varying the Order. An Order can only be varied on this basis once every twelve months.

•where the original Order was made by consent, it was not proper or adequate for the support of the recipient spouse. In so deciding, the Court shall take into account any prior payments or transfers by way of Spousal Maintenance or property settlement.

•material facts were withheld from the Court or false evidence was given.
Spousal Maintenance and Taxation
The recipient spouse does not pay tax on their Spousal Maintenance payments (unlike social security benefits or pensions which are taxable). Payments of Spousal Maintenance by a paying spouse are not tax deductible. Some paying spouses may therefore prefer to meet their Spousal Maintenance liability obligations by lump sum transfer of assets rather than by periodic payments from net income.

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