While in most of Australia, separating de facto couples may execute a superannuation split to adjust their superannuation entitlements in the same way they may divide the rest of their asset pool. This is not currently possible for de facto couples in Western Australia.
In Western Australia de facto couples who have separated cannot split their superannuation unless and until their separation has vested in them. This means that each de facto spouse retains their full superannuation entitlements, unless they have already had their superannuation paid out or are eligible to have it paid out.
The reason for the Western Australian system operating differently is complex. In all states except Western Australia, state governments have referred their legislative power in relation to de facto couples to the Commonwealth. The commonwealth has then used this power to make various laws including the law that governs superannuation splitting for separating couples. The Western Australian government has chosen to retain its power to legislate in respect of de facto couples, but is unable to pass laws in relation to superannuation splitting as only the Commonwealth has this power.
In 2006, there was an attempt by Western Australia by resolve this issue by referring its legislative power over de facto couples to the Commonwealth but only in relation to the superannuation split laws. However, the Commonwealth wanted power over all de facto couple issues in Western Australia and the state and federal governments were unable to reach an agreement.
Western Australia is the only state to have its own family law system, which operates parallel to the federal system.
How does the WA family law system deal with a superannuation split?
In Western Australia, like in the rest of the country, a superannuation split for married couples after separation is commonly done by transferring or rolling over the funds from one superannuation fund into the other without any exchange of cash. This can be done either by agreement or after a Court order is made.
In contrast, the superannuation of de facto spouses is considered a financial resource rather than property in property settlements (Family Court Act WA, Section 205ZD(3) (f) (ii)). This means that an adjustment may be made by the Family Court in favour of either de facto party so that they receive a greater share of the non-superannuation assets if the other de facto spouse has greater superannuation entitlements. However, the superannuation funds of separated de facto couples may be considered property if the superannuation has vested in them. In such circumstances it may be possible to adjourn the proceedings at the Family Court if the Court is satisfied that there is likely to be a “significant change in circumstances”.
Problems with the current system
The Western Australian system has been criticised as being capable of being abused. A party may seek to divert assets or income into their superannuation fund during the relationship or after separation in order to ‘protect’ it from being divided during the settlement.
Superannuation is usually a party’s second largest asset after their home. The inability to order a superannuation split for de facto couples in Western Australia can lead to an injustice for many people who are separating.
The inability to obtain a super splitting order in WA also sometimes leads to a party who resides in WA to have their property matter decided in another state so that a superannuation split order can be made. This is not always appropriate.
Proposed law reform
Due to the concerns about the current situation, the Family Law Practitioners’ Association of Western Australia is working in consultation with Parliament to have the law in this area changed. Both State and Federal Attorneys General have publicly announced their support for law reform in this area.
The proposed reforms would mean that the Family Court in Western Australia would be able to apply the Commonwealth Family Law Act to determine superannuation splits for de facto couples in Western Australia following separation. Such a reform would potentially benefit a large number of people as over 200,000 West Australians declared their relationship status as ‘de facto’ in the 2016 census. Statistics also indicate that women on average retire with only around half the amount of superannuation as men. Changes in the law would go some way towards addressing this gender pay gap as well as providing greater flexibility and an additional option to separating de facto couples in Western Australia to resolve their financial matters in the Family Court.
If you require legal advice or representation in relation to a family law matter, or any other legal matter, please contact Go To Court Lawyers.
By Romana Simic, Senior Associate