Redundancy payments and family law

15 April 2021

Payments you receive as part of your redundancy package may be, and often are, relevant in family law matters involving property settlement, child support and spousal maintenance.

Property Settlement

If you are in the process of negotiating or litigating a property settlement with your former spouse or de facto partner keep in mind that:

  1. Redundancy payments are relevant to the property settlement. You are required to disclose any documents relating to your redundancy payment when making financial disclosure. This disclosure should include source documents identifying the nature and extent of redundancy payments received after separation, and any payment that is likely to be received after settlement (if known prior to the settlement).
  2. Redundancy payments are typically considered ‘property’ by courts exercising family law jurisdiction, and are usually included in the pool of assets or balance sheet of assets available for division between parties.

However, the redundancy payment is usually not considered ‘property’ until an offer of redundancy is accepted, and/or the payment is received.

  1. If you are in the process of negotiating a redundancy with your employer, you should still disclose the status of those negotiations to your former spouse or de facto partner. If you do not disclose an anticipated redundancy payment, there is a risk that any final financial settlement may be set aside at a later date.
  2. If you receive a redundancy payment shortly prior to cohabitating with a partner, it is likely to be considered as an ‘initial contribution’.
  3. If you receive a redundancy payment, either during your relationship or after separation, it may be considered a ‘financial contribution’ made by you. Your former spouse or de facto partner may be assessed to have made an indirect contribution to the redundancy payment. This is often the case when:
    • Your entitlement to a redundancy was accrued by employment maintained during your marriage or relationship
    • Your former spouse or de facto partner contributed to your ability to maintain the associated employment, for example, as a result of their homemaker and / or parenting contributions.
  1. If a redundancy payment includes a component for loss of future wages, and the loss of benefits such as sick leave and annual leave, a court exercising family law jurisdiction may find that that aspect of the redundancy payment should be categorised as ‘income’ rather than ‘property.’ If the payment or portion of the payment is categorised as ‘income’ it will not be included in the pool of assets available for division between you and your former spouse or de facto partner. It will, however, be taken into consideration when the Court assesses your future needs.
  2. The Court will have regard to your lack of income, together with the likelihood of you obtaining employment in the short to mid-term. Your employment prospects may justify the Court making an adjustment in your favour when determining your ultimate property settlement. It is important to obtain specialist family law advice to ensure your future needs are well articulated to the Court and / or taken into account when negotiating any final property settlement.

Child Support

Any redundancy payment you receive may be treated as income or compensation for expected loss of income by the Department of Human Services (Child Support) (DHS) when assessing periodic child support, and may therefore impact the quantum of child support payable.

If this occurs, you may be eligible to have your child support assessment reviewed. DHS recognises that a strict application of the child support assessment formula may not always produce a ‘fair’ result for parents and / or children. The Child Support Registrar will consider whether the effect of the payment on the child support assessment makes the amount of child support payable unfair or unreasonable.

Spousal Maintenance

Any change of income following redundancy may:

  1. impact your entitlement to receive spousal maintenance; or
  2. provide grounds to set aside an existing interim or final court order requiring payment of spousal maintenance.

Our highly skilled team can help you understand the effects of redundancy specific to your individual circumstances. If you need assistance in understanding your rights and obligations, we invite you to get in touch.

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