The Law Commission has tabled in Parliament its recommendation to abolish the rule where the family home is split 50-50 after a break-up.
Other recommendations include introducing a scheme which would require some partners to share income for a limited period following separation, helping to support partners who give up working to raise children.
The independent Crown entity released its final report on a review of the Property Relationships Act 1976 (PRA) - a process which began in May 2016. The last report came out in November.
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Children should be given greater importance, the commission recommends, including giving the main caregiver the right to stay with the children in the family home for a while after the couple separates.
The Law Commission even recommends funding support people in the community to help divorcing couples and explain the new law to them.
Deputy President and lead commissioner on the review, Helen McQueen, said in a statement on Tuesday that the law for dividing property on separation "is no longer fit for purpose in the 21st century New Zealand".
"We think that some of the fundamental concepts of the law remain appropriate, such as the general rule of equal sharing and its application to marriages, civil unions and de facto relationships that last for three years or more.
"But we recommend other significant changes that will affect what property is shared. These recommendations are designed to make the law more responsive to the wide range of different family situations that exist today."
Justice Minister Andrew Little said on Tuesday he had tabled the report and that the Government would now give further consideration to its 140 recommendations.
"I thank the Law Commission, and in particular Deputy President Helen McQueen, for their hard work over the past three years, and to those who took the time to provide considered submissions through the consultation process."
The commission received over 300 submissions on the issues paper and hosted 16 public consultation meetings throughout the country.