Following separation, and as a first step to dividing property, each party is obliged to hand over documents called ‘financial disclosure’. This process is compulsory and is set out in the Federal Circuit and Family Court (Family Law) Rules 2021 (Cth) at rule 6.06.
What is Financial Disclosure?
Financial disclosure is the process of sharing all financial information relevant to your case with your spouse and the Court. This rule exists to ensure that you and your spouse are fully aware of your (now separate) respective financial positions. It applies regardless of whether you have started a court case. Even privately negotiated property settlements rely on accurate and honest financial disclosure.
Before you can start negotiating how your assets will be divided, everyone must know what the ‘asset pool’ is actually made up of. In other words, what is the net value of all of your assets, liabilities and superannuation entitlements. This means that you and your spouse must each tell the other what you have and what its value is.
What must be disclosed?
Relevant information that is either in your possession and/or in your control is disclosable by you. Examples of documents that are controlled by you but not held by you include bank statements that need to be generated upon request and documents held by your accountant on your behalf. This information may be recorded in a paper document, or stored by other means, such as electronically. Documents commonly disclosed can include:
- Recent payslips;
- Bank Statements;
- Superannuation Statements;
- Individual Tax Returns;
- Shareholding Statements;
- Trust deeds, if either of you is linked to a trust of any sort;
- Partnership Agreements, if either of you is linked to a partnership;
- Balance sheets and profit and loss statements for every company you own in part or whole;
- Tax Returns with respect to any of the above-mentioned trusts, companies and/or partnerships; and
- Other relevant documents to assess your/your spouse’s wealth.
If financial circumstances change during negotiations of your case, you must disclose that to your spouse including any ongoing material changes, for example, if you start a business or sell an asset.
You are obliged to provide your disclosure so long as it relates to a topic in issue, parties are not encouraged to seek documents as part of a “fishing expedition”. This means just because you can ask for a category of financial information, it does not necessarily mean that you should do so or will get it.
When does the disclosure process start and end?
The duty to disclose your financial position begins when you first start discussing your separation and continues until your case either resolves or you attend a final hearing.
What happens if you don’t disclose financial material?
If you fail to provide financial disclosure, then the following consequences could apply:
- You may be held in contempt of Court and may have to pay a fine;
- You may be ordered to pay some or all of your spouse’s legal costs;
- The Court may stay or dismiss some or all of your application;
- You delay your case finishing and increase both your and your spouse’s legal costs; or
- Most relevantly – the Court can make an adverse credit finding against you. This can occur if the Court finds that you have been hiding information on assets or have not been forthcoming about your financial information, which then leads the Court to award a greater proportional distribution of the funds available to your spouse.
It’s beneficial to you that you are forthcoming with your financial disclosure. It allows for transparency of your financial position and places you in a better position to make any decisions regarding a financial settlement.
Tit for Tat Disclosure
This is where one spouse seeks an array of documents because they can, but they don’t really need. In turn, it causes the other spouse to feel frustrated and simultaneously seek irrelevant material.
For example, you may receive a letter requesting 3 years’ worth of your bank statements and may feel that you should also request 3 years’ worth of bank statements from your spouse so that it’s “fair”. You may then feel entitled to request the same documents so that your spouse has to also undertake the onerous task of collating their documents. However, it may not necessarily be necessary for your case. If you were the income-earning spouse your bank deposits are important – if the other spouse’s account is only transfers of funds from going to pay household expenses – you may not bother to do a thorough 3-year review – you might simply see the pattern from a few months. Be strategic, not revenge driven.
When requesting financial disclosure, it is important to only seek documents that are relevant to a particular issue in your case. It may be the case that 3 years’ worth of bank statements may be necessary or not necessary, but that will depend on the particular issues of your case.
What happens if you’ve requested disclosure and have not received any documents?
If you have requested disclosure during a court process from your spouse and have not received any of the documents or are only receiving some of the documents, you can issue a subpoena. By asking the Court to issue a subpoena, you can compel a bank, superannuation company or other business to produce the documents you seek. This option is only available once you have commenced court proceedings.
The Federal Circuit and Family Court of Australia has a brochure regarding the Duty of Disclosure. We recommend reading through this document for further information.
How can we help?
If you are ready to separate from your partner or have just been asked to provide your financial disclosure, our experienced family law team is happy to help you navigate to work out what information that you need to provide and also what you need to obtain from the spouse.
Important Disclaimer: The content of this article is general in nature and for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Legal advice about your specific circumstances should always be obtained before taking any action based on this publication.