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FINANCIAL DISCLOSURE – WHAT IS IT AND WHY IS IT NECESSARY?

 

When working through your property settlement during separation, both you and your ex-partner are required to provide full financial disclosure. But what is financial disclosure exactly and why is it necessary? To help you learn more about your rights and responsibilities, BFLS Principal Chris Forster explores the answers to these questions in our latest blog post. Read on.

 

What is ‘Financial Disclosure?’

 

By definition, ‘Disclosure’ is the act of making something known. In a separation, financial disclosure refers to making your financial circumstances known to all parties involved in the case. Transparency of financial information and documents is essential to the negotiation of an informed and reasonable settlement.

 

Why is it necessary?

 

When it comes to Australian family law, people who have separated and are working out a financial settlement are required to provide “full and frank” disclosure to each other. This includes all information and documents that are relevant. If you’re wondering about what counts as relevant, the scope for this can be very broad.

A common saying in family law circles is that if a document has a number on it, then it might need to be disclosed – but the best way to save time and confusion is to chat with a family lawyer who can identify what you’ll need.

Important note: Keep in mind that people are required to provide disclosure even when it’s harmful to their case. Further, the obligation to provide disclosure continues until a settlement has been reached.

 

Here are some key reasons why disclosure obligations exist and why they’re so extensive:

 

  1. Cards on the table – the premise is that settlement negotiations should occur on an informed basis, and no one should be operating ‘in the dark’.

 

  1. Fair settlements – the law provides that settlements should be “just and equitable” for both parties and take all relevant information into account.

 

  1. Minimising disputes – mandatory disclosure obligations enable people to resolve their cases more quickly, with less difficulty, and help to keep them out of court.

 

  1. No line in the sand – in Australia, the starting point is to set out the financial circumstances of the parties at the time of working out the settlement, and not at the time of separation. Consequently, documents like bank account statements showing someone’s spending habits (aka dirty laundry) after separation must continue to be disclosed until a settlement has been reached.

 

Tips for obtaining proper financial disclosure from your ex:

 

If you’re trying to negotiate a reasonable settlement, it’s crucial to obtain proper disclosure from the other party. This will help with:

 

  1. Establishing what are the assets, liabilities, superannuation, and financial resources to be dealt with.

 

  1. Working with a family lawyer to determine a just and equitable division.

 

You’re not assumed to know all the information that’s relevant to your settlement. It’s standard practice to make requests for disclosure and there is a very strong expectation that it will be provided. Your family lawyer will be able to fully support you in this process.

 

What if I am being asked for disclosure?

 

If you’re being asked for disclosure, provide it! Refusing, ignoring, or delaying disclosure is a bad move for either party. These tactics will often result in cases becoming protracted, more expensive, and bitter than necessary.

Non-disclosure is a common reason for court proceedings to be undertaken. For parties whose case is in court, non-disclosure can result in the making of costs orders, other sanctions, and judges making inferences that result in the other party receiving a greater share of the assets.

 

Here is a common scenario showing the importance of obtaining disclosure and some of the frustration often associated with it:

 

Jane is an HR Manager for a big firm in the city. Her husband Mike knows that Jane earns a good salary and also receives annual bonuses and occasionally some company shares, but isn’t aware of the details because they keep their finances separate. Mike has an electrical contracting business that he operates through a company.

Mike and Jane have separated. Mike has reconnected with an old flame, Kylie, and their relationship is getting serious. He recently bought her some expensive jewellery and is paying for some cosmetic surgery she’s wanted for some time. Jane suspects that Mike was seeing Kylie for a while before they separated, though he’s denied it.

Jane’s mum passed away a couple of years before she and Mike separated. Her estate has finally been finalised and Jane has received a substantial inheritance into her bank account.

In this scenario, Mike will need disclosure of Jane’s remuneration package as well as her tax returns and documents relating to the employee share scheme. Jane will need disclosure of financial documents relating to him personally and his company.

Mike might be embarrassed about Jane seeing his bank statements and some of the payments he’s made for Kylie. Jane might object to sharing any information about her inheritance, especially if her mum and Mike didn’t get on.

 

Final advice:

 

Ultimately, transparency of financial information and documents in family law cases is essential to the negotiation of an informed and reasonable settlement. If you’re feeling stuck because a disclosure issue can’t be resolved, our family law team at Bayside Family Law Solutions can chat with you about helping to progress your case. Give us a call on 03 8842 3140, or reach out to us through our website here. 


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