When a marriage or de facto relationship breaks down property can be divided between the parties and superannuation splitting is particularly important as superannuation is often a large asset of one or both of the parties to the relationship.
Superannuation is treated as property under the Family Law Act and as such can be adjusted, transferred or divided between parties when a relationship breaks down.
Although it should be noted that de facto couples in Western Australia are not subject to the superannuation splitting laws which is covered by the Family Law Act.
Superannuation is taken into account in the overall property settlement, and although it is different it is subject to the same principles that apply generally:
- All superannuation is taken into account, irrespective of when it was acquired (before, during the relationship or after separation).
- It is not automatically subject to a 50/50 split. If the Court decides the assets should be apportioned 60% to one party, and 40% to the other party that, can also occur with their superannuation.
- the court will decide based on what is “just and equitable”.
How is superannuation different?
Superannuation is different from other types of property because it is an asset that is held on trust.
A superannuation trustee controls the assets of the superannuation fund and therefore the process to transfer, divide or adjust superannuation is slightly different to the process adopted for assets such as bank accounts, cars or real estate.
Options for splitting superannuation
Separating couples may either:
- enter into a formal written agreement to split superannuation; or
- seek consent orders to split superannuation; or
- if you cannot reach an agreement, seek a court order to split superannuation.
A formal written agreement requires that both parties separately instruct a lawyer who must sign a certificate stating that independent legal advice about the agreement has been given.
Once this agreement is made you do not need to go to court in relation to the superannuation interest. The agreement is not registered in court so you should be careful that each of you retains a copy.
Even when an application is made to a court, it is possible to reach an agreement at any stage, without the need for a court hearing.
Your super split can be part of your overall property settlement.
The effect of splitting superannuation
Splitting does not immediately convert superannuation into a cash asset – it is still subject to superannuation laws and is usually only accessible after retirement age.
A splitting agreement or order may permit the creation of a new interest for the non-member spouse or a transfer or roll-out of benefits for the non-member spouse to another fund.
This means that when a payment from a superannuation interest becomes payable to the member spouse (usually because a condition of release has been met, such as retirement from the workforce) a certain amount will be paid to the non-member spouse and the remainder will be paid to the member spouse.
The Trustee of the member’s superannuation fund is effectively directed to divide and transfer a portion of the member’s entitlement to the super fund of their spouse, who is then free to deal with their remaining superannuation entitlements in accordance with their own fund requirements.
What you need to do to split superannuation
Although the superannuation splitting laws do not require you to value the superannuation interest before making a payment splitting agreement this would be a sensible thing to do.
If you are seeking a payment splitting order then the court is required to have evidence of the value of the superannuation interest.
Under the superannuation splitting laws you can apply to the trustee of a superannuation fund for information about a superannuation interest, if you are requesting the information to assist you in the negotiation of a superannuation agreement or orders under the Family Law Act in relation to superannuation interests.
You can get information about the value of the superannuation interest, or information that will enable you to calculate its value, along with other information that might be of assistance when you are considering what might be done with the superannuation interest.
Documents which will help you obtain this information are available in a Superannuation Information Kit at your nearest family law registry, or from the Family Court of Australia website. Some superannuation funds have their own form for you to complete.
The superannuation fund may charge a fee for providing the information, and this is paid when you send the forms.
Valuing the superannuation fund
The information from the trustee may be enough to establish the value of the superannuation interest. However, the valuation of some superannuation interests e.g. defined benefit interests can be complex and an expert may need to provide a valuation.
Other things you should know
Most superannuation interests can be split. However, generally any interest that has a withdrawal benefit of less than $5,000 is not splittable as it would not be cost effective.
It is possible to defer or postpone making a decision about how to split a superannuation interest. In this case you can make a flagging agreement or seek a flagging order, which prevents the superannuation trustee from releasing or dealing with the superannuation entitlements until a decision is made and the flag is lifted.
If you are seeking court orders about superannuation, you must tell the superannuation fund trustee about the orders you are seeking. The trustee must have an opportunity to attend the court hearing and object to the orders that you are seeking. Even before filing consent orders with the court the trustee must be given a copy of the draft orders sought at least 28 days prior to the consent orders being filed with the court, to allow the trustee time to consider them and if necessary object to the orders being sought. Sometimes a trustee may write back and request a change in the wording but otherwise consent to the order being made.
Once the superannuation order is made, whether by consent or after a hearing, it is important to provide a sealed copy of the order to the trustee, so that they can effect the super split.
Dealing with superannuation in a property settlement when a marriage or de facto relationship breaks down can be a complicated process, apart from the legal considerations there may be tax consequences that flow from splitting superannuation and the process can be difficult, confusing and time-consuming.
An experienced family lawyer can help make the application as efficient and accurate as possible and will help you to understand the process and any information you receive.
If you or someone you know may need assistance please feel free to call us on (07) 4724 1016 or email [email protected]