Under the Commonwealth Constitution, the Federal government has the power to make laws with respect to marriage. As such, the various States and Territories historically were left with the power to make laws dealing with matters arising out of the breakdown of de facto relationships, including parenting and financial issues.

In the mid 1980s various States and Territories conferred upon the Federal government the power to deal with parenting issues arising out of de facto relationships. Previously, contested parenting issues involving children from de facto relationships were dealt with in the State Civil Courts. After the Federal government acquired the power to deal with children of de facto relationships, all parenting disputes, whether arising from marriage or de facto relationships, were then dealt with in the Family Court jurisdiction.

Financial issues arising out of marriage relationships have always been dealt with in the Family Court. However, financial issues arising out of de facto relationships were historically dealt with in the State and Territory Civil Courts.

To add to the confusion of which jurisdiction to turn to in contested financial cases after the breakdown of a relationship, the Federal government established the Federal Magistrates Court in 2000. The idea was for the Federal Magistrates Court to deal with the simpler cases, whereas the Family Court was to deal with the more complex cases. Loose guidelines indicated which was the appropriate jurisdiction to deal with any particular case. However, those guidelines were not clear, and not consistently applied.

In late 2008 the Federal government passed legislation to amend the Family Law Act after various States conferred upon the Commonwealth the power to deal with financial matters arising out of de facto relationships.

This meant that any de facto relationship which broke down after 1 March 2009 would be subject to the new laws under the Family Law Act. Those new laws would treat financial issues arising out of the breakdown of de facto relationship on a par with marriage cases. Previously the economically disadvantaged party in de facto relationships usually achieved a poorer result in property settlements than in equivalent marriage cases.

This was seen as a sensible move as potentially de facto relationships which had broken down involving contested parenting and property issues could end up having parenting issues litigated in the Family Court/Federal Magistrates Court and financial issues in the State Civil Courts. Now all issues arising out of the breakdown of de facto relationships will be litigated in the Family Court or Federal Magistrates Court.

In a move which will relieve confusion over which jurisdiction in which to commence proceedings, it has been announced that in 2010 the Family Court and the Federal Magistrates Court will merge. The practical result of this will be that any contested parenting or financial issues whether arising out of marriage or de facto relationships, will now all be dealt with in the one Commonwealth Court rather than having to navigate the minefield of State Civil and Commonwealth Courts.