Once a married or de facto couple separates, their superannuation (Super) is treated as property of the marriage or relationship under the Family Law Act 1975 (Cth) (FLA) and the value of the couples’ Super benefits will be taken into account when determining a property settlement.
Super is held in trust arrangement and differs from other types of property of a marriage. There are rules that govern when a party is able to access their Super funds. Laws regarding Super splitting apply to both married and de facto couples equally, except in Western Australia (WA).
Super splitting can be a complex area of law and you should ensure you know exactly where you stand regarding Super entitlements after separation or divorce.
Valuing your superannuation
The Family Law (Superannuation) Regulations 2001 (Regulations) provides different methods for valuing Super interests. The methods provided in the Regulations can be confusing, overwhelming or inappropriate for some Super interests. We strongly recommend you seek advice from an experienced family lawyer as to the most appropriate valuation method available for your type of Super fund.
If you want to obtain information about your Super for valuation purposes, you will need to do the following:
- Complete a Form 6 Declaration;
- Complete a Superannuation Information Request Form;
- Send both forms to the trustee of the fund.
These forms can be found on the Family Court website. Your Super fund may charge a fee for processing the forms. Your lawyer is also able to complete the forms on your behalf, which is recommended as family lawyers have experience in filling out Super Information Kits. This will ensure the forms are completed correctly at first instance, helping you save time and money. Once the necessary information is provided and the forms completed by your Super fund you may need a formal valuation conducted by an actuary. That will depend upon the type of superannuation interest that you have. An interest known as a “defined benefit interest” will require an actuarial valuation.
What factors are considered when determining the amount of the superannuation split?
Financial contributions are not the only factor considered when assessing the amount of a Super split. Non-financial contributions such as care of children of the relationship and the family home may also be considered. The Family Court may also consider the financial position of both parties after their divorce or separation when determining the value of a Super split.
Splitting your superannuation
Before negotiations commence in relation to the splitting of Super, it is vital to speak to a lawyer who may need to help you to place a “payment flag” on both parties’ Super accounts. This will prevent either party withdrawing money from the accounts before the accounts have been valued.
Splitting super does not necessarily convert the amount split into a cash asset. After the agreed amount has been transferred to the other parties’ super account, it must remain there until a condition of release of Super is satisfied, for example preservation age is reached, retirement, severe financial hardship or terminal illness.
In WA, further legislation to give effect to a scheme for superannuation splitting for parties in a de facto relationship is yet to be passed. Once this occurs, parties who have been in a de facto relationship will be eligible to seek Super splitting only if:
- they are separated;
- have not made a BFA; and
- there are no final Family Court Orders existing between them.
Married couples in WA are able to obtain super splitting orders which are subject to Commonwealth laws when determining a Super split.
Methods used to split superannuation
There are a few methods in which Super can be split. The method applied will largely depend on whether both parties can come to an agreement on the amount of Super that will be included in the property settlement.
Super may be split as part of a binding financial agreement (BFA). If your BFA did not provide for a Super split, it is still possible to add a Super agreement to the BFA after your relationship has ended. If there is no BFA in place and both parties have agreed to a Super split, they can file an application for Consent Orders with the Federal Circuit and Family Court of Australia.
The Federal Circuit and Family Court of Australia will review the parties’ Consent Orders to ensure they are fair and reasonable. The Consent Orders will then be made into a Court Order, which will be legally binding on both parties.
If parties are unable to reach a mutual agreement on splitting their Super, the Federal Circuit and Family Court of Australia will determine the division of all property including the amount of any Super split by considering a range of factors. This type of Court Order is known as a Property Order.
Splitting Super can become a complex task. We recommend seeking further advice and guidance from an experienced family lawyer.
Couples who are going through divorce or separation proceedings can feel stressed and overwhelmed, especially when it comes to property division. Super splitting is usually a complex area of property division, especially when parties cannot reach a mutual agreement.
There are various and complex methods of valuing and splitting Super funds under the applicable Regulations. After the agreed amount has been transferred to a party’s Super account, it must remain there until a condition of release of Super is satisfied.
Source: Donlan Lawyers