What Is a de Facto Relationship & What Are the Risks?

We unpack why it matters to know and what you should consider if you are in a de facto relationship already. And if you aren’t, what to know now for the future.

People seek our advice either before they start living with their partner or at the end of the relationship.

When people speak with us they are typically either:

• Seeking advice about the potential consequences of moving in together; 
• Concerned about how a de facto relationship may impact their ability to protect/quarantine their wealth;
• What to do to minimise the risk of a partner making a claim on their property in the future; or
• Want to determine if a recently former partner is likely to be able to make a claim for a property settlement.

Determining whether a former partner can make a claim depends on whether your relationship is considered de facto.

What Is a De Facto Relationship?

A de facto relationship is a relationship between two people, regardless of gender who are not married and not related, and live together on a ‘genuine domestic basis’. 

The term ‘genuine domestic basis’ is from the Family Law Act 1975 and it is the overarching basis for determining if you are or have been in a de facto relationship.

What Is a Genuine Domestic Basis?

This is how the relationship is distinguished from other forms of relationships, such as with someone you are casually dating or with a housemate. Some of the indicators considered when determining if you are or have been living together on a ‘genuine domestic basis’ are: 

• Whether there is/has been a mutual intention to share a life together;
• How long you have been in a common residence;
• Whether you are/have had a sexual relationship; or
• Whether there is any financial dependence, interdependence or support.

Other determining factors include what a couple has done in regard to household duties and the public aspects of the relationship.

If your wider circle knows that you socialised together and went to each other’s family events, for example, you would be considered to be living together on a ‘genuine domestic basis’.

However the lines can be blurred given the way society is today and the different types of relationships that exist.

Sometimes people are living together but unsure if their relationship is considered a de facto relationship. Less commonly, there are married people who are also in a second relationship that is a de facto relationship. Sometimes we know that people can be in two de facto relationships. With so many variations of relationships, a Court has to consider a number of different factors.

Additional Factors in Determining What Is a De Facto Relationship

The most well known rule of de facto status is when two people have been living together for two years. What you may not know is that the two year rule does not apply in the following scenarios:

1. A couple who has a child together is automatically classified as being in a de facto relationship. This is regardless of whether they have lived together continuously for two years or not.
2. If two people decide to move in together and purchase a property in both names from the outset or, they have been living together and then decide to buy a property together before the two year period has passed, they are classified as a de facto relationship.
3. If two people are living together and are substantially intermingling their finances, including acquiring joint property together and operating joint bank accounts, they are considered to be in a de facto relationship.

In these scenarios where a couple will be considered to be in a de facto relationship and the relationship ends, either could be entitled to make a property settlement claim.

When people live together and intermingle their finances, it muddies the waters when determining the nature of their relationship if they haven’t yet been living together for over two years.

Less common is when people have registered their de facto relationship. It is rare but the idea behind doing that is so they do not need to have the argument about whether they are in a de facto relationship or not, later on. 

We have had clients in the past where people were living together, but say they were not in a de facto relationship. A situation where this could arise is where people start out as housemates, then had some form of sexual relationship, but never had the intention of living together on a genuine domestic basis.

So you can see how the waters can become increasingly muddied given the different nature of relationships.

Financially Separating After a De Facto Relationship

If a de facto couple separate and there is no agreement in place about how they financially separate, one or both parties may consider seeking a property settlement.

If no agreement can be reached a series of dispute resolution methods can be undertaken and if not successful, a Court application is filed and a Court will make a decision. 

This area of the law is a highly discretionary area. The way the couple have operated their finances, including whether they have substantially intermingled their property or kept their property and finances separate is a key consideration as to approach to be adopted. To avoid the risk of having to go to Court, early legal advice to minimise the risk of a dispute is the best approach. 

There are risks involved in intermingling your property early on in a relationship or purchasing property together without a plan or exit strategy if things don’t go to plan. A Binding Financial Agreement is the most beneficial method to protect assets from partners.