What Happens With My Income After Divorce?
Your income after divorce may be effected even following a property settlement.
Your property settlement may include ongoing obligations to
is not necessarily the final aspect of working through the financial arrangements of a divorce. You may have an obligation to dedicate parts of your income to support your ex-partner and/or your children.
These payments could be in the form of spousal maintenance and child support.
Do I have to pay Spousal Maintenance?
Spousal Maintenance (also known by its American term as “alimony”) is the money paid to a spouse or de facto partner who cannot adequately provide for themselves. Spousal Maintenance applications need to be brought within one year of the divorce.
The legal standard of where you have to pay under the Family Law Act is when your former spouse cannot ‘reasonably’ provide for themselves.
Importantly, this is not a black and white test. The court takes into account both the needs of your former spouse as well as your personal capacity to pay.
More specifically, factors that can be considered include, but are not limited to:
- Age and health
- Income and assets
- Ability to work
- What is a suitable standard of living
- If the marriage has affected your ability to earn an income, and
- Who the children live with
While it is possible for a permanent maintenance order to be made, in most cases spousal maintenance only needs to be paid up to the point where your former spouse can support themselves. (eg until a point when they find stable employment)
Importantly, if your former spouse becomes remarried you will no longer have to pay spousal maintenance.
If they enter a de facto relationship an assessment will be made by the court on the financial capacity of that relationship to provide for your former spouse.
Spousal Maintenance matters may be best conducted informally through alternative dispute resolution such as mediation or negotiation. These agreements can be made in three ways: an informal agreement, consent orders or a Binding Financial Agreement (BFA).
An informal agreement is an agreement set between you and your former spouse. While at the outset it is easy to maintain and flexible to modify, it is not sanctioned or enforceable by the court.
A Consent Order is an agreement that the court reviews and approves. The Court will review the agreement and modify it to enable that it is ‘fair’ to both sides. A Consent Order is enforceable by the Court and makes the obligations of both sides quite clear.
A Binding Financial Agreement can be entered in with approval from a lawyer. It does not need to adhere to any restriction with regards to the amount paid, nor does it need approval by the Court.
Each approach has its advantages and disadvantages. You should find one which is appropriate for you and your former spouse’s circumstances. More formal agreements can be abrasive but can create clarity and security. Less formal agreements are cheaper and are more flexible on average but can be risky.
How about Child Support?
You will be eligible to pay Child Support if your child is living with the other parent. There are two options when it comes to determining Child Support: a Limited and a Binding Child Support Agreement.
In a Limited Child Support Agreement, the amount paid is determined by an assessment conducted by Services Australia. A Limited Child Support Agreement is convenient as you don’t require a lawyer to form the Agreement.
A Binding Child Support Agreement does not require a Child Support Assessment. The amount paid in a Binding Agreement is an amount both parents agree on and thus in a way have more flexibility. Binding Child Support Agreements require the approval of a lawyer.
Spousal Maintenance and Child Support can affect your income after divorce or separation. So it’s important to plan ahead to understand your obligations and/or create an appropriate plan for your finances.
If you need help planning a Spousal Maintenance or Child Support Agreement, or alternatively you are looking to apply for those payments you should consult a lawyer. Contact us via the form.
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