Superannuation Splitting

When a relationship breaks down, superannuation is treated as an asset of the relationship. However, superannuation does differ from other types of property as it is held in trust and is subject to specific “preservation” restrictions. This means that it must remain in a superannuation fund until a condition of release is satisfied (usually the beneficiary of the fund reaching retirement age). However, both married and de facto couples across Australia can “split” their superannuation benefits after separation. Superannuation splitting can be organised through a financial agreement, consent order or court order. This page looks at the law surrounding superannuation splitting in family law matters in Australia.

What happens to superannuation when a couple separates?

Under theFamily Law Act 1975, there are three options when it comes to superannuation after a divorce or separation.

The first option, although rarely used, is for the parties to defer the decision entirely until another time. This is possible by adding a flag to the superannuation fund that prevents the fund from distributing payments until the flag is lifted. This approach is most commonly used when the superannuation is in a defined benefit account, as it is difficult to accurately assess the future value of such funds.

The second option is to take the value of super into account when making a property division, but leave the superannuation benefits untouched. This could mean that a person with more superannuation receives less from the sale of joint property or other assets.

The third, and more common option, is superannuation splitting. Following the end of a long relationship, the couple can use a superannuation split to equalise superannuation benefits. This means pooling the value of both parties’ superannuation, dividing it into two, and redistributing it to the two parties. Splitting does not convert the superannuation funds into a cash asset, and the funds continue to be subject to superannuation laws.

Superannuation splitting does not always mean equalisation. The former couple, often with the help of solicitors, can negotiate a superannuation split that is tailored to the parties’ unique situation. For example, one spouse may seek a larger portion of the cash assets in the property pool to purchase a home, while the other spouse may prefer to keep the majority of their assets in superannuation.

Financial agreement for superannuation splitting

Separating couples can enter into a formal financial agreement to split the superannuation (a superannuation agreement). For this agreement to be valid, both parties must obtain independent legal advice. Two independent lawyers must sign certificates stating that this legal advice was given.

Court-ordered superannuation splitting

A former couple can obtain a court order to divide superannuation in two ways:

• Through the consent of the parties

If the spouses reach an agreement about splitting their superannuation, they can make an Application for Consent Orders through the Federal Circuit and Family Court of Australia (FCFCOA). The consent order can be made in chambers without either party attending court.

• Following a court hearing

Part VIIIB and part VIIIC of the Family Law Act empower the FCFCOA and the Family Court of Western Australia to redistribute superannuation benefits between separating spouses. Because of recent legislative revision, de facto couples in Western Australia are also now eligible to split superannuation.

How do courts decide how to split superannuation?

The courts have wide discretion to decide a just and equitable division of the couple’s superannuation interests. A four-step process is applied to determine each party’s entitlement:

1. Value of the superannuation.
2. Assessment of each party’s financial and non-financial contributions to the superannuation fund.
3. Each party’s circumstances, including their age, health, income earning capacity, children, and existing financial commitments and responsibilities.
4. Final assessment of whether the split is just and equitable given all the circumstances.

Value of each superannuation fund

Before splitting superannuation, it is necessary to understand the total value of each person’s fund. Someone can request any information held by the Commissioner of Taxation about their former spouse’s superannuation. Requests must be made using the approved Superannuation Information Request form using the Commonwealth Courts Portal.

A former spouse can also contact the trustee of the superannuation fund with a Superannuation Information Request Form and a Form 6 Declaration. The superannuation fund may charge a processing fee to provide the information. This request may be sufficient to assess the value of the superannuation. When superannuation interests are more complex, it may be necessary to obtain a further valuation from an expert. Superannuation splitting legislation sets out methods for valuing different types of superannuation. For instance, self-managed superannuation funds are generally valued with the help of an accountant.

Notifying the superannuation trustee

If a person seeks a court order about superannuation splitting, they must inform the trustee of the superannuation fund. The party must serve a sealed copy of the application on the trustee at least 28 days before the start of the hearing. The trustee is entitled to “procedural fairness”, meaning they have a right to attend the court hearing and object to the superannuation order. Once a superannuation order is made (whether by consent or hearing), it is essential to provide a sealed copy of the order to the trustee of the superannuation fund.

You should seek legal advice if you are considering superannuation splitting. There are time limits that apply to claims against a former spouse’s superannuation after a divorce or separation. A solicitor can help you reach an agreement with your former partner without the time and expense involved with a court hearing. Please get in touch with the family law team at Go To Court Lawyers on 1300 636 846 for advice on this issue or any other legal matter