Earning Capacity in Family Law Matters
Earning capacity is an important factor that is considered when family courts deal with matters such as property settlements and child support. The goal of these proceedings is to ensure that each party is able to maintain a reasonable standard of living post-separation, taking into account access to wealth, material goods, and other necessities. This page deals with earning capacity in family law matters.
In property settlement proceedings, it is common for one partner’s non-financial contributions to be taken into account and balanced against their spouse’s financial contributions. This ensures that the lower-earning party receives a fair share of assets and finances. Additionally, if a party has low actual or expected earnings, they may be eligible to receive spousal maintenance from their higher-earning ex-spouse.
A parent’s earning potential can also impact their obligation to pay child support. The court takes into account each parent’s earning capacity to determine a fair and reasonable amount of child support to be paid.
During family law proceedings such as divorce and child support, the court considers various factors to ensure that each party is able to maintain a reasonable standard of living post-divorce. These factors include the wealth, material goods, comfort and necessities of each party.
Lower earning capacity
There are various reasons for a person to have a lower earning capacity than their partner, including childcare and home maintenance responsibilities.
A primary carer, who is responsible for providing day-to-day care for children and doing household chores, may experience a decreased earning potential due to the time spent on these tasks.
In family law matters such as property settlements, courts take these non-financial contributions to the relationship into consideration.
Loss of earning capacity
There are also various reasons for a partner to have lost earning capacity since commencing the relationship.
This may occur because the couple has agreed to have only one partner work outside the home, due to cultural norms or caring responsibilities.
Earning capacity may also be lost because of family violence, which may prevent a partner from participating in paid work outside the home, or from acquiring qualifications.
Loss of earning capacity may be incremental, with a partner taking time out of paid employment after the birth of a child, returning to work with limited hours, moving into a casual or less secure pattern of work, or having more children.
A person may also lose earning capacity because they are supporting a partner, or because of a lack of accessible and affordable child-care and limited support for flexible work arrangements. This can make it challenging for both parties to meet the demands of work and caring for children and family.
All these factors can contribute to a loss of earning capacity, making it challenging for individuals and families to maintain financial stability and independence.
Walters & Carson
In the 2018 Family Court of Australia decision of Walters & Carson, a de facto couple with three children under 18 faced an imbalance in earning capacities. The couple had a net property pool of $7,640,851 with the man earning $12,000 weekly and the woman earning $824 weekly.
Section 79(4) of the Family Law Act 1975 governs the alteration of property interests for married or de facto couples. The court determined a 15% property adjustment in the wife’s favour. The husband appealed the decision, but his appeal was dismissed.
The husband’s appeal from child support and maintenance orders was successful.
Judges consider various factors when adjusting each party’s earning capacity or potential future earnings, including the couple’s property pool net value, each party’s financial and non-financial contributions, the special needs of the couple and children, and whether the effect of the order is just and equitable.
How can lawyers help?
Go To Court Lawyers understands the importance of considering a person’s earning capacity during a separation. In accordance with the Family Law Act, our team evaluates the contributions made by each party to the other’s earning capacity, as well as each party’s ability to support themselves.
If one party lacks an earning capacity or has a low earning capacity, they may be eligible for a larger share of the asset pool than they would otherwise have received and/or to spousal maintenance.
If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.