When a marriage or de facto relationship breaks down property can be divided between the parties.

Superannuation is treated as property under the Family Law Act and as such, for all couples except de facto couples in Western Australia, superannuation can be adjusted, transferred or divided between parties when a relationship breaks down. This is what is commonly referred to as “superannuation splitting”.

In Western Australia, the Family Court Act is the relevant legislation which applies in relation to de facto couples. The Family Court Act does not provide for superannuation splitting and as such superannuation cannot be adjusted, transferred or divided between parties to a de facto relationship in Western Australia.

However, in all cases, superannuation is taken into account in the overall property settlement, and although superannuation cannot be “split” in Western Australia it is subject to the same principles that apply generally in all other property settlement matters as follows:

  • All superannuation is taken into account and forms part of the “asset pool” for division, irrespective of when it was acquired (i.e. before or during marriage or the relationship or after separation).
  • It is not automatically subject to a 50/50 split but will be included in the Court’s consideration as to the overall division of the property between the parties. If the Court decides the assets should be apportioned 60% to one party, and 40% to the other party, this will usually include superannuation interests being taken into account.
  • The court will decide the division of property, including superannuation, 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 (a “superannuation agreement”); or
  • seek consent orders to split superannuation; or
  • if you cannot reach an agreement, seek a court order to split superannuation.

A superannuation agreement is a formal written agreement which requires that both parties separately instruct their own lawyer who must sign a certificate stating that independent legal advice about the superannuation agreement has been given to them.

Once this agreement is made you do not need to go to court. The agreement is not registered in court so you should be careful that each of you retain 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.

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 superannuation agreement or order for splitting superannuation 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 superannuation fund.

New Interest

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.

Transfer or Roll out

The Trustee of the member’s superannuation fund is effectively directed to divide and transfer a portion of the member’s entitlement to the nominated superannuation fund of their spouse, who is then free to deal with their remaining superannuation entitlements in accordance with their own funds’ 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 still be a sensible thing to do. A valuation is important particularly if the superannuation interest is not a standard accumulation interest as the balance of a superannuation interest as provided by a superannuation fund in their member statement may not be the value of the superannuation interest as calculated under the appropriate valuation methods for the purpose of property settlement under the Family Law Act or Family Court Act.

If you are seeking a payment splitting order from the court then the court is required to ascribe a value to the superannuation interest and you will need to provide evidence to assist the court in determining a value of the superannuation interest.

Under the superannuation splitting laws you can apply to the trustee of a superannuation fund for information about your or your spouse’s superannuation interest, provided the information is sought for the purpose of negotiating a superannuation agreement or property settlement between you.

This information from the superannuation fund will either inform you of the value of the superannuation interest or will enable you to calculate its value together 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.

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 can be complex and an expert may need to provide a further 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 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 or entering into a superannuation agreement, you must tell the superannuation fund trustee about the orders you are seeking or the terms of the agreement. The trustee must have an opportunity to respond to the orders or agreement that you are seeking.

Once the superannuation order is made, whether by consent or after a hearing, or once a superannuation agreement is made it is important to serve a sealed copy of the order or the executed superannuation agreement to the trustee so that they can effect the terms of the order or agreement.

Summary

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 wants more information or needs help or advice, please contact us to arrange an Introductory Consultation on (08) 9335 9877 or email reception@frichot.com.au

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