What are the risks of being in a ‘De Facto’ Relationship?

Deemed de factos and de facto property entitlements: a little word of warning …

The modern approach to relationships finds many couples co-habiting long before considering marriage. However, you could be in a de facto relationship without even realising it – and, if so, your personal assets are at serious risk if you and your de facto part ways.

The Federal Government now has jurisdiction over de facto relationships under the Family Law Act 1975 (Cth) (“the FLA”).

Deemed de factos

Under the FLA, as soon you live with someone on a genuine domestic basis you are deemed to be de facto partners, provided you are not already related by family and not married to each other.

So, how do you determine whether you are living together on a genuine domestic basis? The considerations include:

• The duration of the relationship;
• The nature and extend of the couple’s common residence;
• Whether a sexual relationship exists;
• The degree of financial dependence;
• The ownership, use and acquisition of their property;
• The degree of mutual commitment to a shared life;
• Care and support of children; and
• The reputation of the relationship in the public.

If you live with someone on a genuine domestic basis and have a child, you are immediately considered a de facto couple for the purposes of the FLA, and have immediate property and maintenance entitlements.

There is no discrimination between heterosexual and homosexual relationships under these provisions of the FLA.

Some issues to be aware of – Centrelink and Income Tax Returns

Centrelink considers a couple to be in a de facto relationship from the time they start living together as a couple. It is important to keep this in mind when accepting or applying for Centrelink benefits as it may affect your entitlements.

The Australian Tax Office does not have a fixed timeframe for deeming a couple to be de facto – a couple can access tax benefits (such as offsets) as soon as they start living together as a couple.

Superannuation

The FLA allows a court to also make orders about superannuation interests if a claim is made by a de facto partner after the breakdown of the de facto relationship. This is an important power for the courts to have because many people hold a significant portion of their wealth in super.

However, the FLA provides a mechanism by which de facto partners (or people contemplating entering into a de facto relationship) can prospectively contract out of a court order about super in a Binding Financial Agreement or ‘BFA’ This is discussed further below.

Binding Financial Agreements

Binding Financial Agreements (or, as they are more commonly known, “pre-nups” or “BFAs”) are largely used before a couple become married, but they can also be entered into by de facto partners or people contemplating living together as a couple.

These agreements are a legally enforceable way to safeguard the assets that you have when entering a relationship. However, the agreement must comply with the various requirements in the FLA to withstand a challenge by an ex-partner, and we strongly recommend that both partners seek comprehensive legal advice before signing on the dotted line.

It is important to be aware that most Binding Financial Agreements will cease to have effect if you later marry your de facto partner, so it is worthwhile to re-assess the situation and seek new advice if you are planning to marry your de factor partner.

If you would like some advice about the legal impacts of your personal relationship, call us on 1300 654 590. If our lawyers are busy and cannot take your call immediately, we promise to call you back well within 24 hours. Alternatively, send us an email at marie@andreyev.com.au.

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The information contained in this post is current as at 27 March 2019