For many Australians, superannuation is an essential component of financial planning and future security. Your superannuation may well serve as your retirement savings mechanism. If you are thinking about separating from your partner, dividing superannuation assets can be complex and emotionally charged. In Australian family law, superannuation is treated as a significant asset that must be considered as part of your property settlement. Superannuation entitlements accumulated during a relationship are considered joint property and are subject to division when your relationship breaks down. Superannuation splitting is part of property settlement negotiations in separation proceedings, allowing you and your former partner to equitably distribute assets and secure your financial futures. If you are separating, it is essential for you to understand how superannuation splitting works and what to be aware of.

This overview explains what you need to know about superannuation splitting in family law matters and gives you an introduction to the relevant legal principles and processes. This article considers the implications of superannuation splitting for you and your former partner. Expert legal advice is vital to ensure a fair and accurate division of assets. If you understand the role of superannuation splitting in property settlements, you can make informed decisions about your financial security.

Superannuation splitting can be complex but effective when you are seeking to secure your future needs. With appropriate, strategic guidance, you can achieve positive outcomes that safeguard the financial stability of you and your former partner. Read on to find out about the nuts and bolts of superannuation splitting so that you can ask the right questions to secure your more stable financial future as you consider achieving a clean break through your property settlement.

What do You need to know about Superannuation Splitting when You Separate?

The Legal Framework for Superannuation Splitting

The Family Law Act 1975 (Cth)

The Family Law Act (1975) (the Act) covers the division of property, including superannuation, for separation. Under the Act superannuation is classified as property. This means that it is subject to division between partners during property settlement, similar to other assets like homes or investment properties. If you have been in a long-term marriage, superannuation may represent a large portion of your total wealth as a couple. The Act outlines the principles and processes involved in superannuation splitting and emphasises the need for a just and equitable distribution of assets.

Superannuation Splitting Laws

In 2002, superannuation splitting laws were introduced to enable the division of superannuation interests as part of property settlements between separating or divorcing couples. These laws apply to all legally married and de facto couples, including for same-sex relationships, in all Australian states and territories except Western Australia.

The Process of Superannuation Splitting

If you and your former partner can agree:

You and your former partner can together agree on how your superannuation is to be divided and this agreement can then be legally documented. You can come to a private agreement between you that can be made before, during or after your relationship. The agreement must comply with specific legal requirements to be enforceable. This type of agreement is called a Binding Financial Agreement (BFA).

You and your former partner (or your legal representative) could submit Consent Orders to the Court for approval. These orders then become enforceable orders. If you would like to achieve a greater degree of certainty and you would like a simpler option that obtaining Court Orders, then Consent Orders may be the way to go for you.

If you and your former partner cannot agree:

If you and your former partner cannot agree then either of you can apply to the Federal Circuit and Family Court for orders as to how to split your superannuation. In coming to a decision, the Court will consider several factors including the financial and non-financial contributions of both you and your former partner, the length of your relationship, and any future needs (including age, health and income potential) you each have. The Court will then determine the ‘just and equitable’ division.

Disclosure

During the property settlement process, full and frank disclosure of all financial assets, including superannuation, is required. You and your former party must provide complete information regarding their financial circumstances to ensure a fair division of everything you own and everything you owe.

Superfunds have their own rules

Different superannuation funds have their own rules, processes and procedures around superannuation splitting. To initiate a superannuation split, some funds may require certain forms and processes or may have restrictions on how and when funds can be accessed. Be careful that you check the terms of the relevant specific superannuation fund(s) to you and ensure that you comply with the requirements of the fund(s).

Time Limits

Strict time limits apply to superannuation splitting. If you are divorced, you must make a claim within 12 months of your divorce being finalised. If you have been in a de facto relationship, then you have two years from the date of separation to make a claim. If these time limits lapse, then you may need to seek leave of the court to go ahead.

Steps for Superannuation Splitting

Valuing the Superannuation Interest

The first step in superannuation splitting is determining the value of each party’s superannuation interest. This valuation is crucial to ensuring an equitable distribution of assets. The value can differ significantly, depending on the type of fund (for example, an accumulation fund vs. a defined benefit fund). The superannuation fund trustee is legally obliged to provide you with the necessary information and, in most cases, a family law valuation will be required.

Here are the steps that are usually involved in valuing superannuation:

1. Information Gathering: You will need to obtain superannuation statements from your Superfund(s) to find out the up-to-date balances. Superannuation balances can frequently be found online.
2. Future Benefits: The future value of the benefit may be required to assess the future benefit of the fund, if the fund is a defined benefit fund. In this case, actuarial valuation may be required.
3. Account for Charges and Fees: It is important for you to be aware of any fees that may be associated with accessing or transferring superannuation because these costs may affect your final settlement.
4. Negotiating a Split

Once the value of your superannuation interests is established, you and your former partner can negotiate the terms of the split. You can achieve your agreement through private negotiations, family dispute resolution, mediation, or collaborative law processes. It’s essential and wise to have an expert family lawyer to guide you during negotiations, providing tailored advice specific to your circumstances so that you achieve a fair and practical outcome.

Formalising the Split

As mentioned above, once you have agreed the split, in order to legally bind a superannuation split, parties must enter into a BFA or apply for Consent Orders from the court. Both options require the parties to agree on the terms of the split. A family lawyer’s expertise in drafting enforceable financial agreements can be invaluable in ensuring that your agreement is legally sound.

The Superannuation Fund will require a BFA or Consent Orders in order to give effect to the superannuation split.

Different Types of Superannuation Splits

Payment Split

A payment split refers to dividing the superannuation interest upon the member partner’s retirement, disability, or another condition of release. In this scenario, the non-member partner receives a specified proportion of the superannuation interest as it becomes payable.

Base Amount Split

A base amount split involves transferring a specified lump sum from the member partner’s superannuation interest to the non-member partner, who would then have their superannuation interest in a separate account. This approach allows for a more immediate division of assets.

Key Considerations in Superannuation Splitting

Tax Implications

There may be tax implications when splitting superannuation.

Generally, superannuation cannot be accessed until retirement age, but there may be specific provisions allowing access due to relationship breakdowns. There may be tax implications for an early withdrawal. However, transfers between spouses as part of a property settlement may not incur tax, but you should seek the advice of an accountant or financial advisor to understand any potential tax liabilities fully.

Superannuation splitting can have tax implications for both parties, with the potential to impact the overall financial outcome of the property settlement. Consult an accountant, financial adviser and family lawyer with experience in taxation matters to guide you through the tax implications and ensure you consider all relevant factors.

Preservation Age and Access to Funds

Even after a superannuation split, it’s essential to understand that superannuation remains subject to preservation rules. This means that the non-member partner will only be able to access their share of the superannuation interest upon reaching their preservation age or meeting a condition of release.

Choice of Superannuation Fund

In some cases, the non-member partner may have the option to choose which superannuation fund they want to transfer their share to. It’s crucial to consider the fees, performance, and insurance options of various funds so that you can make an informed decision.

The Importance of Expert Legal Advice and Support

Superannuation splitting can be complicated. You would be wise to engage a skilled family lawyer specialising in superannuation splitting. You can then rest assured that you can confidently sail through the complex landscape of Australian family law. A specialist family lawyer can:

1. Provide expert advice on the legal and financial implications of superannuation splitting, to ensure that you make informed decisions at every stage of the process.
2. Represent your best interests during negotiations or mediations, working diligently to achieve equitable and satisfactory outcomes.
3. Ensure compliance with legal requirements for agreements and court orders.
4. Provide guidance to you on the valuation of superannuation implications
5. Draft legally enforceable and compliant binding financial agreements or consent orders, protecting your financial future and providing peace of mind.

Closing thoughts

Superannuation splitting is a complex yet crucial part of family law property settlements during divorce or separation. A thorough understanding of the legal processes and relevant considerations empowers you to make informed decisions that safeguard your financial security moving forward. Agreeing your superannuation split may be part of achieving the ‘clean break’ that you and your former partner need to move on with your lives.

Are you looking for reliable, strategic advice and assistance about your property agreement? Contact our expert family lawyers, right now!

If you are wondering how to finalise your property arrangements and you want an approachable, experienced, savvy family lawyer to secure the financial stability you deserve, reach out to Anumis Legal. Our experienced family lawyers are committed to providing patient, practical, and reliable legal advice tailored to your unique circumstances.

Anumis Legal provides dedicated support, expert knowledge, and tailored solutions to navigate even the most complex family law disputes. Call Anumis Legal to find clarity, peace and the understanding you deserve. For your complimentary consultation call Anumis Legal now on 07 5455 6347 or email admin@anumis.com.au.