Below we answer the questions, ‘What is Financial Disclosure?’ and Can I refuse financial disclosure?’. We will also unpack the documents that you or your former partner may need to produce in this process.
What is Financial Disclosure?
To begin with, both you and your former spouse or partner will be required to provide to each other, copies of all information and documents that are relevant to your financial separation (known in family law as a property settlement). A document is considered ‘relevant’ if it:- Verifies the nature and extent of the assets, liabilities and financial resources of one and/or both of the parties (often referred to as ‘the asset pool’) that will be the subject of division of the parties including:
- Assets and liabilities held in each person’s separate and/or joint names;
- Assets and liabilities held within any companies or trusts in which either or both parties have an interest;
- Verifies the nature and extent of the current and any future income parties including income:
- from employment; and
- from other sources such as a company or trust;
- Relate to an issue in dispute in the property settlement (i.e. if the document/information could prove or disprove an issue in dispute) which may include:
- The contributions each person has made to the asset pool;
- Factors relating to what each person may ‘need’ to support themselves in the future, often referred to as ‘future factors’.
What Documentation Is Required in the Financial Disclosure Process?
The following is a general list which will include the types of documents that both parties may need to produce but is not a complete list.- Evidence of income, (your 3 most-recent pay slips)
- The last 3 personal tax returns
- Bank statements for the 12 months prior to separation to the current date (including accounts in the sole name of each person or which a party holds jointly with another person)
- Documents to verify any interest in a trust or company including:
- Trust deeds (including any variations to those deeds)
- Tax returns for the trust/company for the last 3 financial years
- Financial statements (balance sheet and profit and loss) for the last 3 financial years
- Bank statements for all accounts held by the trust or company for the 12 months prior to separation through to the current date.
- Your current superannuation fund statement
- If your super is self-managed, the trust deed and financial statements for the fund for the last 3 financial years
- Documents to evidence any assets disposed of or sold in the 12 months prior to separation (and in cases where it has been a long time since separation, since separation) may also be required
- Documents that provide evidence of any inheritance, gift from a family member or friend, a redundancy payment, personal injury award or lottery winnings (including documentation to verify the receipt and application of the asset/funds) can also be required as evidence of finances
- Documents to evidence any future asset transfer or income that is likely to come a party’s way (for example, share options, trust distributions, inheritances); as well as
- Documents that verify both people’s financial position when they began living together such as valuations or purchase documents for assets owned, bank statements to demonstrate savings held or superannuation statements to prove entitlements at the time parties began living together.
Can I Refuse Financial Disclosure?
If one person ignores or refuses to participate in the financial disclosure process, they can do themselves a great disservice. When one person incurs legal costs to obtain another party’s disclosure, this can result in the Court ordering the person responsible to pay the other person’s legal costs. The Family Law Court is a ‘Court of impression’ as it is a highly discretionary area of law. Demonstrating a lack of respect for the financial disclosure requirements may negatively impact any family law related matter that may come before the Court.What If I (or My Former Partner) Do Not Disclose Everything?
There are sometimes cases where individuals are hesitant to provide the required documentation for a range of reasons. If your matter ever was to come before the Court and you or your former partner refuse to provide disclosure of the relevant documentation, there are a number of steps the Court may take.- Firstly, they can make an order for the person who has failed to provide disclosure (‘the non-disclosing party’) to pay the legal costs of the other party (in full or in part).
- They can refuse to allow the non-disclosing party to rely on a document if it has not been previously disclosed to the other party.
- They can place a ‘Stay’ (also known as a hold) or dismiss all or part of the non-disclosing party’s application.
- The Court can find the non-disclosing party guilty of contempt of Court and issue a punishment of a fine or a term of imprisonment (although this is rare and only in extreme circumstances).
- If a non-disclosure is only revealed after the Court makes a final Property Settlement Order, the Court may set aside the Order (even if the non-disclosure is discovered several years later).
- Filing an Application in the Court (supported by an affidavit) to seek an order for the other party to produce the documents
- Filing a subpoena to a third party to obtain copies of the documents
- Sending a notice to the other party to produce the documents
- Sending a notice to admit facts to the other party; and/or
- Sending a notice to a third party (not involved in the property settlement) to provide the documents.
Managing Your Financial Separation and Property Settlement Effectively
The idea in negotiating a property settlement is that both parties should come to the table ‘with their cards facing up’ so that decisions can be made from a fully informed place. Full and complete disclosure of all relevant documents is required to maximise the opportunity for an amicable and early resolution of the property settlement. The absence of cooperation in the disclosure phase slows down the settlement process making it potentially more expensive to finalise.
If you and your former partner or spouse have separated and are having direct discussions, it is helpful to exchange all documentation upfront. If everyone has the information they need and there are few or no questions about the history of the relationship and what the current asset pool is, both parties can save themselves significant stress, time, effort and costs.
Written by Tony Phillips
Accredited Family Law Specialist
Managing Director of Phillips Family Law
Related Information
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- How are contributions in long marriages assessed where an inheritance is received?
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- Processes to get to an agreement after separation: property and finances
- Property Settlements and Trusts: What you need to know
- Separation, Divorce and Superannuation
- Do you suspect your spouse is hiding assets? The red flags to watch out for
- New Beginnings
- Accountants and Financial Advisors: How are Trusts treated in a divorce?
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