When it comes to the division of assets during a divorce, superannuation is often an overlooked resource. However, superannuation is considered property and forms a crucial part of the asset pool in property settlements. In some cases, superannuation may constitute a significant portion of a couple’s matrimonial asset pool, making its division a critical element of the divorce process.
Superannuation can be divided or “split” according to specific superannuation splitting laws.
For families where one party was a homemaker or a stay-at-home parent, a superannuation split may be particularly desirable. In these situations, the party who was the homemaker might have minimal superannuation, but may have made significant non-financial contributions to the marriage or de facto relationship. Typically, superannuation is divided when one party has significantly less superannuation, especially in long marriages or relationships.
Understanding the Division of Superannuation as Property
Under the Family Law Act 1975, superannuation is treated as property. However, it is a unique form of property held in trust, meaning the superannuation fund that the super is held with is the trustee for the superannuation funds and can only release the superannuation funds when a certain condition is satisfied, for example when someone reaches retirement age.
Most superannuation accounts are accumulation interests, meaning the funds are held in an account and cannot be accessed until retirement. Accumulation interests are straightforward to value, making them less complicated to divide during property settlement.
On the other hand, defined benefit interests present more challenges in valuation. These superannuation entitlements are provided based on certain factors, such as the duration of employment with an organisation and the final salary.
When superannuation is split in divorce, neither the member spouse nor the non-member spouse will be able to access the superannuation until the condition of release is satisfied, such as reaching retirement age. This means that neither party will receive the amounts from the super split in cash, nor will they receive it immediately unless the condition of release is met.
Legal Framework for the Division of Superannuation in Divorce
The division of superannuation in divorce can only occur under specific circumstances:
- Through Court orders, either through consent orders agreed upon by both parties or through orders made by the Court.
- By way of a binding financial agreement.
The superannuation must be valued according to the methods prescribed in the Family Law (Superannuation) Regulations 2001.
In some cases, superannuation splitting can be deferred to a later date, such as at retirement, through a mechanism known as a flagging agreement. This allows the decision to be postponed until that time.
When the Court makes superannuation splitting orders, it considers:
- the value of both parties’ superannuation interests;
- the financial and non-financial contributions of each party;
- and the future needs of both parties.
Before any superannuation splitting orders can be made, procedural fairness must be adhered to. This includes notifying the superannuation fund in writing that the member spouse intends to split their super. The written notice must be provided in advance of the orders, and the fund must be supplied with a copy of the orders once they are made.
Practical Tips for Managing Superannuation Division
There can be significant tax consequences associated with the division of superannuation, making it wise to consult an accountant to understand these implications fully.
Superannuation funds may also charge costs for administering the request for the super split, and these costs are typically deducted from the super funds themselves.
During property settlement proceedings, parties can request information from the ATO through the Family Court about the other party’s superannuation interests. The ATO can then provide this information to the Court, which will distribute it to both parties.
This is particularly useful if one party suspects the other of hiding superannuation interests.
Given the complexities involved, it is imperative to seek advice from a reputable family lawyer if you are engaged in negotiating a family law property settlement.
The division of superannuation in divorce can be complicated and may not be suitable for all property settlements. However, agreeing to a superannuation split can be beneficial, as it may allow one party to retain more liquid assets while providing the other with a valuable addition to their retirement funds.
It is essential to discuss with your family lawyer the potential benefits and disadvantages of superannuation splitting orders when negotiating a family law property settlement.
At Matthies Lawyers, we are committed to addressing your family law needs. Our experienced team of family lawyers proudly serves clients in South Yarra, Toorak, Windsor, Prahran, Armadale, and Richmond.
Contact us today for expert legal advice and support or call +61 3 8692 2517.
Frequently Asked Questions
Can superannuation be accessed before retirement age in a divorce settlement?
Generally, superannuation cannot be accessed before retirement age, even if it is divided during a divorce settlement. However, there are exceptional circumstances where early access to superannuation might be permitted, such as severe financial hardship or compassionate grounds.
It’s important to consult with a family lawyer and possibly a financial advisor to understand whether your situation might qualify for early access to superannuation funds.
What happens to my superannuation if I remarry after a divorce?
Remarrying after a divorce does not automatically impact the superannuation split agreed upon in your previous divorce settlement. However, your new marriage may affect your overall financial situation, which could have implications for your superannuation and estate planning.
It’s advisable to review your financial situation and update any relevant documents, such as binding death benefit nominations, to reflect your new circumstances.
Are there different rules for dividing superannuation in de facto relationships?
In Australia, the rules for dividing superannuation in de facto relationships are generally similar to those for married couples, provided the de facto relationship meets certain criteria under the Family Law Act 1975. This includes:
· the length of the relationship;
· whether you have children together;
· and whether you’ve lived together on a genuine domestic basis.
However, there may be some differences depending on the state or territory where you live, so it’s important to seek legal advice tailored to your specific situation.
How does international superannuation get treated in an Australian divorce?
If either party has superannuation or similar retirement funds held overseas, the division of these assets can be more complex.
The treatment of international superannuation in an Australian divorce depends on various factors, including:
· the laws of the country where the superannuation is held,
· any applicable international agreements,
· and how these funds are recognised under Australian family law.
Consulting with a lawyer experienced in international family law issues is essential to navigate these complexities.
Kate Scolyer – Solicitor – Matthies Lawyers
Disclaimer: This article provides general information only and is not intended as a substitute for legal advice.