Section 15 (Economic Disparity) Claims - When 50/50 is not the end of the story

When a relationship ends, many people assume the outcome is simple and everything is split equally. In many cases that is true, the starting point under the Property (Relationships) Act 1976 (the Act) is equal sharing of relationship property. However, the law also recognises something people often only realise at separation: a 50/50 division of assets does not always lead to an equal financial future.

Why a “fair” 50/50 split can still feel unfair

During a relationship, couples often divide responsibilities in a way that works for the household. One person might focus on paid work and career progression. The other might do more unpaid work, for example caring for children, running the household, or supporting the other partner’s career.

The law treats financial and non-financial contributions as equal in value. However, even when contributions are treated equally, the long-term economic outcome after separation can be very different. One partner may leave with stronger income, stronger career momentum, and higher future living standards, while the other may need to rebuild earning capacity after years out of the workforce or in reduced hours.

What is a section 15 claim?

At its simplest section 15 is designed to compensate one party to a relationship who has invested more time to the non-monetary contributions of the relationship. It is also sometimes called an “economic disparity” claim. It allows the Court to adjust the relationship property outcome when, at the end of the relationship:

1. A party’s income earning potential has significantly diminished; and/or
2. The income earning potential of the other party has been enhanced.

What is meant by diminished and enhanced income earning potentials is individual to the circumstances of each case. It is not primarily about short-term financial need (which is usually addressed by spousal maintenance under different legislation). Instead, it is aimed at recognising relationship-generated disadvantage that affects one partner’s future economic position.

The legal test (summarised)

Section 15 applies “on the division of relationship property”, so it is part of the overall property division process and an adjustment will be made from one party’s share of the relationship property to the other’s. Broadly, the Court works through three questions:

1.   Is there likely to be a significant disparity in future income and living standards?

The difference needs to be meaningful and likely to persist, not just a short-term gap.

2.   Is the disparity because of the division of functions during the relationship? (i.e. causation)

It is not enough that one person earns more. The Court must be satisfied the relationship’s structure contributed to the long-term difference, for example, one partner taking primary responsibility for caregiving or household management while the other advanced their career.

3.   Is it “just” to make an award, and what should it be?

Even when disparity and causation are established, the Court has discretion, and there is limited guidance of the factors the Court will consider. However they may consider factors such as each person’s likely earning capacity, ongoing caregiving responsibilities, and any other relevant circumstances. 

How is an award under section 15 calculated?

If the Court decides to exercise its discretion and make an award under section 15, it is important to note that they also have an overriding discretion as to the quantum of that award. There is no single prescribed method for calculating the amount of compensation, however, since the Supreme Court's decision in Scott v Williams, the ‘disparity’ method has become the preferred approach.

The disparity method focuses on the actual gap between the parties' likely post-separation incomes. Rather than attempting to reconstruct what might have happened in a hypothetical past, the Court assesses the difference in the parties' future earning capacities, applies that disparity over an appropriate period, and then considers whether the resulting figure is just in light of all the circumstances. Many judges have preferred this approach because it is more practical and provides a more direct assessment of the financial consequences of the parties' respective positions following separation.

Importantly, the Court retains a broad discretion regardless of the methodology used. The ultimate objective is to reach a just outcome that properly recognises the economic consequences of the division of functions during the relationship.

The 60/40 Approach

While courts now generally favour the disparity method, we have noticed that, in practice, many relationship property disputes are resolved by reference to a simple percentage adjustment to the property pool, commonly resulting in outcomes such as a 60/40 division. This approach is often attractive because it is easier, faster, and less expensive than undertaking detailed calculations of future earnings and economic disparity. This aligns with the principles of the Act.

While courts have made it clear that that economic disparity does not automatically result in a 60/40 split. The Court's task is to achieve a just outcome, and a percentage adjustment must be considered in light of the size of the asset pool, the extent of the disparity, and the circumstances of the particular case (e.g. if the parties are close to retirement).

For that reason, courts often use a percentage division as a cross-check to ensure any section 15 award is fair and does not overcompensate one party.

Time limits

There are strict time limits for bringing claims under the Act, and they differ depending on the relationship type. As a general guide, applications after a marriage or civil union is dissolved must usually be made within 12 months of the final dissolution order, and applications after a de facto relationship ends must usually be made within 3 years. The Court can extend time in some cases, but it is discretionary.

How we can help

Section 15 claims are fact specific and can be complex. We assist clients with section 15 issues in a practical, resolution-focused way, including:

1. Assessing early whether economic disparity is likely to be a real factor and how it may affect settlement strategy.
2. Helping negotiate settlements that properly address disparity issues as part of a full and final agreement.
3. Documenting outcomes in a separation agreement that reflects the parties’ intentions and reduces the risk of later dispute.