Friends, Flatmates or Defactos and how to tell them apart

2020-03-16
Seemingly small differences in your personal relationships can have a profound (and surprisingly expensive) effect when officially considered under different government legislation. Seemingly small differences in your personal relationships can have a profound (and surprisingly expensive) effect when officially considered under different government legislation.

Friends, flatmates or de facto partners - and how to tell them apart

When it comes to romance and relationships, the emotional decision about who you think is your partner, may be very different to the legal decision about who is legally considered your de facto partner.

The questions about who may be a boyfriend or girlfriend and who is a de facto become important distinctions when it comes to super payouts, life insurance payouts and family law claims on your finances, investments and property interests.

Jump Ahead

Modern families, friendships and relationships

Today's modern relationships can be both complex and meaningful, so who is legally considered a de facto (and who therefore has an additional level of legally enforceable entitlements) can require some professional guidance, just to be sure.

  • Sometimes people are living together but unsure if their relationship is legally considered a de facto relationship.
  • Sometimes, a person who is married may also have a second relationship that is a de facto relationship
  • Sometimes some people could be considered to be in two de facto relationships at the same time, in the eyes of the law.

Regardless of what your relationship status is, it pays to know what it's legal status is too.

What the law says constitutes a de facto relationship

The definition of a de facto relationship in Australia is when two people - regardless of gender - who are not married and not related - are living (or have lived) together on a ‘genuine domestic basis’.

  • This terminology is from the Family Law Act 1975 and it's the primary question that needs to be asked to ascertain if you are in a de facto relationship.

What does ‘genuine domestic basis’ mean?

This means considering how the relationship is distinguished from other forms of relationships such as; with someone you’re casually dating or with a housemate or someone you are caring for in exchange for discounted rent or another form of payment.

A situation where this could arise is where people start out as flatmates, then had some form of sexual relationship, but never had the intention of living together on a genuine domestic basis.

When is a relationship considered a de facto relationship?

The most well-known rule of de facto status is said to be ‘when two people have been living together continuously for more than two years’.

But what you may not know is the two-year rule does not apply when any of the following occurs:

  • a couple who have a child together are considered to be in a de facto relationship, and even though they have not yet been living together in a relationship for two years,
  • When two people decide they’re going to purchase a property in both names and move in together
  • When two people have been living together and then decide to buy a property together before that two year period has passed.
  • When people live together and substantially intermingle their finances, it muddies the waters when determining the nature of their relationship if they haven’t yet been living together for over two years. Operating a joint bank account etc. may indicate their de facto status.

Why is this important?

Whether you're part of a casual relationship, officially a de facto, perhaps a carer, maybe you’re together but living apart (TLA) - these seemingly small differences in your personal relationships can have a profound (and surprisingly expensive) effect when officially considered under different legislation.

  • The Family Law Act in Australia recognises de facto relationships, which usually provides both de facto parties the same legal rights and responsibilities as marriage and the rights to make a property claim.
  • The Superannuation Law in Australia recognises de facto relationships, and provides special rights and payouts tax free, and importantly the right to receive payouts directly from the super fund rather than having to compete for it with other beneficiaries of a person's Will or general estate.

Why this matters for everyone?

  • You need to be aware of the potential consequences of moving in with friends, partnering up or something in between.
  • You need to be aware if a former partner is likely to be able to make a claim for property settlement.

Why does this matter for people with superannuation?

A person who is legally recognised as your de facto has special legal status and entitlements both in Family Law (entitlements to financial and property) and Superannuation Law (entitled to super benefit payouts and significant tax savings).

If you’re unable to prove you were a de facto couple (to the satisfaction of the Family Court and or a Superannuation Trustee) and both are arguably highly subjective, this could mean;

  • your life partner is at risk of not receiving an expected payout,
  • they may have to pay unnecessary and significant levels of tax on any payments received, and
  • they could miss out altogether on your desired wishes.

Any super payout could also be sent to your ‘ex-partner’ instead.

Why does this matter for people accessing the Family Law Court?

Before a family law court can make any orders of a financial nature, the court must first decide if the parties involved were officially recognised in the eyes of the law as de facto.

  • If the relationship does not fit the required legal standard, then the Court has no jurisdiction to make financial orders.

Why does this matter for LGBTI people?

For many people in the LGBTI community, Marriage Equality has only recently been legally recognised. This means many LGBTI may be partnered and unmarried and there can be a number of relationships and circumstances that may not fit the current legal view of who is officially recognised as a de facto partner.

  • For example: those who are principally acting as a carer for someone, those who may be Together Living Apart (TLA) from their partner for a number of reasons, those with living arrangements not  seen as meeting the de facto standard of assessment.

Why does this matter for people receiving Centrelink payments?

When deciding if a person is part of a couple or just flatemates, Centrelink will take into account the financial aspects of the relationship, the nature of the household, the social aspects of the relationship, any sexual relationship between the parties involved, and the nature of the people's commitment to each other and whether they’re not living separately on a permanent or indefinite basis.

  • If you’re in a de facto relationship, and you’re receiving benefits or payments calculated or based on your relationship status, you’ll need to notify Centrelink if you enter into a de facto relationship.

What are the options?

  • If you need to prove you are a person's official partner, there are three main ways to do that if required.

So a good question to ask yourself is simply:

'Am I in a de facto relationship?'

Contact us today here to see if we're the type of people you'd like to work with.
Drew Browne

Drew specialises in helping people protect and provide for what matters most in their lives. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His company Sapience Financial and Investment Services is committed to using business solutions for good in the community, and in 2015 certified as a B Corp. In 2017 Drew was recognised in the inaugural Australian Westpac Businesses of Tomorrow national awards. Drew writes for successful Small Business Owners and Entrepreneurs at Smallville, his blogs can be read on Amazon.com and you can connect with him on LinkedIn.

Any advice provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.

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Drew Browne

Sapience Founder & Director.
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