How is HECS treated in Family Law Property Settlements?

Like many aspects of family law property settlements, when it comes to how a HECS debt is treated, the answer is not clear cut. If relevant, a HECS debt needs to be considered when ascertaining what the property pool is to be divided, and then how the pool is divided — as in, who gets what.

HECS is a unique liability in that the interest rate is very low in comparison to other liabilities. Secondly, it may not always be required to be repaid and is not due by a certain date — it is conditional on the person who has accumulated the debt earning enough of an income to then be required to repay it and is repayable by instalments.

As is always the case with family law matters, the Court considers the individual circumstances of the matter. The Court will look at the circumstances in which the HECS debt was incurred — such as whether is was accumulated before, during or after the relationship. The Court may look at the context of how the incurrence of debt assisted the parties — such as whether the person went on to utilise their degree in an associated profession to earn an income to support the parties. The Court may consider whether they think the debt will actually need to be repaid in the future. The Court may give consideration to the circumstance where both parties had HECS debts but one party has been able to repay their debt during the relationship but the other party will only need to repay the debt now that the relationship has ended and they need to obtain their own income. Taking these considerations (among others) into account, the Court then decides if it is just and equitable for the HECS debt to be considered a joint liability and included in in the property settlement or whether it is just and equitable for the HECS debt to be excluded on the basis that it is a personal liability.

The Court held that a HECS debt was a joint liability in the following cases:

• Lane & Owen [2010] FamCA 575 — The Husband and Wife had both incurred HECS debts but the Husband’s debt was paid off during the marriage using the parties’ joint funds.
• Berry & Berry [2010] FMCAfam 542 — The Husband had agreed with the Wife undertaking a degree and the Wife subsequently got a job immediately after obtaining her degree. The Wife was effectively thereafter the sole income earner.
• Chaikin & Gerhard [2018] FCCA 3146 — The Husband and Wife had both incurred similar HECS debts although the Wife had paid hers off post-separation. The Wife still had a scholarship debt. The Court held that both the HECS debt were joint debts arising in the relationship and should be included in the settlement.

The Court held that the HECS debt was a personal liability in the following cases:

• Partington & Cade [2008] FamCA 945 — The parties each had similar HECS debts. The Court held that the liabilities should remain personal liabilities as there had been no repayments made to the debts from joint funds. Both parties were yet to be employed in their professional fields that they had undertaken their studies in and it was unlikely that the either of the parties would need to actually make repayments towards the debts.

• Mullins & Birchmore [2014] FCCA 1297 — This was quite a complex matter in that the Husband was not found to be truthful in his evidence and his overall conduct in the proceedings was poor. The Husband had sought that the Wife pay 70% of his $50,000 HECS debt – but the total debt was actually only around $26,000. During the marriage, the parties had jointly already paid off the Husband’s previous HECS debt of around $11,000.

  The Court found that the debt should not be a joint liability as the Husband had been the sole beneficiary of his studies. It was the Wife who had been engaged in employment throughout the marriage, who financially supported both the Husband while he studied and their children. The Husband only obtained employment in the field associated with his study late in the marriage and provided an increased income for only 2 and a half years. At Trial, The Husband also indicated that he wanted to commence further university studies for 4 to 5 years and that he intended to leave his current employment field altogether.

  In determining that the HECS debt was a personal liability of the Husband, the Court noted that the repayment of the debt was conditional on the Husband receiving income and by deciding to return to study, the Husband had chosen not to fulfil his true income earning capacity.

• Zimin & Nickson [2014] FCCA 206 — The Wife completed her university studies after separation. There would be no joint benefit from the incurrence of the debt - it was determined to be a personal debt of the Wife only.
• Thomm & Painter [2015] FCCA 1001 — The Wife’s HECS debt of $13,229 was excluded from the settlement. The HECS debt was incurred during the marriage and although the Wife was repaying $150 per fortnight by the time of the Trial, the Court held that the HECS debt did not contribute to the Wife’s earning capacity during the marriage – she only commenced such employment after the parties had financially separated.

With more and more people undertaking university and degrees costing an increased amount, HECS/HELP is being utilised more than ever before. It is inevitable that case law will continue to grow in this area. As HECS can be a significant liability (particularly in the context of modest property pools), how a HECS debt is treated in a property settlement can be a very important issue. Case law suggests that there can be 2 different approaches to how a HECS/HELP loan is taken into account. It is therefore imperative that you ensure that you receive the best advice possible. Our family lawyers are highly experienced in all aspects of property settlements &mdash you should make an appointment to see one of our family lawyers by booking online or calling 03 5445 1000.