Superannuation is property for the purposes of a property division between a separating couple.
Because superannuation often represents many years of employer and personal contributions and compound interest, it is usually a significant asset in the property pool of separating couples.
You may be entitled to a superannuation split or obliged to split your superannuation with your former partner if you were married or in a de facto relationship of more than 2 years, or where there is a child of the de facto relationship or where one party has made significant contributions.
Superannuation can be split either by:
- an order of the Federal Circuit and Family Court of Australia; or
- a superannuation agreement (a financial agreement that deals with a superannuation interest).
The Family Law Act 1975 provides the legislative framework for the Court to make orders to distribute superannuation interests. Like property division, the legislation mandates a 4-step process for determining each parties’ entitlements:
- First, each parties’ superannuation entitlements are valued;
- Second, the parties respective contributions (both financial and non-financial) to the acquisition, conservation and improvement of the fund are assessed;
- Third, each parties ‘future needs’ are considered, including their respective income capacities; age and state of health; whether there are dependant children and their living arrangements; each parties’ existing financial obligations.
- Fourth, an assessment is made as to whether the split is just and equitable in all the circumstances.
However, splitting superannuation does not convert superannuation into cash. Instead, the sum is ‘split’ from the member spouses’ superannuation fund and transferred to another fund, either a new fund for the non-member spouse or rolled out to another fund. The split will remain preserved in accordance with the superannuation laws and the individual fund’s conditions of release.
How much you may be required to pay to your ex-partner by way of superannuation split is usually determined by adding together the balance of all superannuation funds, dividing the figure by two and splitting the larger fund to effect an equalisation. However, in some circumstances parties can negotiate a superannuation split tailored to the needs of their separation, for example, where one party seeks to trade off superannuation for a greater cash sum to enable them to retain or purchase property. In other situations, for example, where the relationship is a short one and where one party brought in significantly more superannuation at the commencement of the relationship than the other party, and where the parties future needs are otherwise equal, an equalisation may not be appropriate.
At Empower Family Law we have extensive experience in advising clients in a range of superannuation matters, including those which involve defined benefit funds, self-managed funds and accumulation funds. We have relationships with expert valuers and accountants specialising in superannuation. We have assisted clients to achieve favourable superannuation splits in complex situations.
From your very first conference with us you will know where you stand, what your options are and what to expect.
That is why your first 30-minute consultation with us is FREE.