Superannuation is designed to provide for a person when they retire, and for many, it is a reflection on years of hard work. During the course of one’s working life a percentage of pay is deposited into a superannuation fund, and while that percentage may go largely unnoticed, it all adds up in the end.
Money deposited into a superannuation fund is usually only accessible upon retirement age, so it’s not considered an asset until that time, but when you’ve spent the most part of your working life in a relationship with someone whom you have shared assets, supported, or been supported by, and perhaps raised a family with, the question of superannuation and what will happen to it becomes very relevant.
When a couple decides to go their separate ways, the question of how superannuation is dealt with concerns both parties. One party may feel protective over the ‘nest egg’ they have worked hard to build, while the other party may have serious concerns about their retirement years if they have spent time outside the workforce to raise a family.
Can superannuation be divided?
Superannuation can be divided as part of a property settlement or as a standalone agreement. In 2002 the Australian government introduced superannuation splitting laws which enable superannuation to be split and dealt with as part of a family law property settlement. Under these laws, superannuation is treated as a different type of property and still subject to superannuation laws which restrict when one can access superannuation funds.
It should be noted that under some circumstances, superannuation cannot be divided. For example, where the value of superannuation is so little that splitting it would not be cost-effective. However, in most cases superannuation can be divided.
Who decides how superannuation is divided?
Superannuation can be divided according to a superannuation agreement or by a court order.
A superannuation agreement is a formal, written agreement, the strict requirements of which are set out in the Family Law Act. In order for a superannuation agreement to be binding, it must outline how superannuation is to be split (which is not as straightforward as one might think); the trustee of the super-fund must be given notice, and each party must obtain independent legal advice.
Court orders can be obtained by consent of both parties upon their separation, or at the end of litigation. Under the Family Law Act, any property settlement aims to provide a just and equitable outcome for the parties involved. When deciding if, and how, superannuation should be split, the court will be guided by whether it is just and equitable to do so.
How is superannuation divided?
Superannuation can be divided according to a base amount or a percentage.
Where superannuation is divided according to a base amount a nominated amount, e.g. $60,000, is transferred from one party’s super fund to the other party’s super fund. This method is generally used when superannuation is in the growth phase.
Superannuation can be divided according to a percentage, for example, a party may be entitled to 50% of the other party’s superannuation. However, this method is usually preferred when superannuation is in the payment phase, or if a party is to receive 100% of the other’s entitlement. In the latter case, fluctuating market rates which affect the underlying superannuation investments make it difficult, if not impossible, to specify with precision the whole sum held in the fund at any given time.
What are the steps involved?
The steps involved will depend upon whether the superannuation is being divided by an agreement or court order at the end of litigation, however, in both cases establishing the value of the superannuation is the first step in any division of superannuation.
Under superannuation splitting laws, an eligible person can apply to the trustee of a superannuation fund to find out the value of a superannuation fund or to obtain information that will help them calculate its value. Methods of valuing superannuation are set in Super Regulations.
An eligible person includes the superannuation fund member, a member’s spouse, or any person who intends to enter into a superannuation agreement with the member. An application to the trustee of a superannuation fund must include certain forms and declarations along with any administrative fees charged by the superannuation fund in order to provide the information.
Whether you and your former spouse agree on how to divide superannuation or not, independent legal advice will be paramount to ensure your agreement is binding and you receive a fair outcome. At Taylor & Scott Lawyers, our family law team always work to ensure the best outcomes for our clients. We bring years of experience, particularly in delicate matters, and a wealth of understanding.
For legal advice you can count on, contact us on 1800 600 664 or email us at email@example.com to discuss how we can help protect your superannuation and ensure you are adequately provided for in your retirement years.
At Taylor & Scott, We Care For You.