When couples separate, there is often confusion about whether superannuation becomes part of the property pool to be divided.
The short answer is yes.
Superannuation has always been seen as a different kind of asset to, for example, the matrimonial home. However changes to the law in 2002 allow the Family Court to treat superannuation as property and to make binding Orders for its division after separation.
The law applies to de facto couples as well as married couples, and the same principles apply whether it is a negotiated settlement or a contested hearing.
The legal reforms resulted from the findings of a survey by the Australian Institute of Family Studies in 1999. It was found that in more than half of cases involving divorce and property division, superannuation was not even considered. In those cases where superannuation was taken into account, a common result of property settlement was that wives ended up with a greater share of the matrimonial home but no retirement income, while the husband kept his future superannuation entitlement, but was left without realisable assets. The logical solution was to empower judges to divide the superannuation, just as they could divide money in the bank.
Valuing superannuation for Family Law purposes is a specialised area, however this has become much simplified by the procedural requirement that the parties submit a Form 6 Superannuation Information request to the superannuation trustee. Our Family Lawyers can assist with this process.
Orders that provide for superannuation to be divided will bind each party, but also bind the trustees of the superannuation fund or funds. The type of Order to be made depends on whether the superannuation is still accumulating during the party's working life, or whether a party has become eligible for payment. The main types of Orders are splitting Orders and flagging Orders.
Suppose the parties agree to divide their total superannuation interests on an equal basis. A simple scenario is to determine the value of each superannuation account, halve the total, and then calculate the amount that would be required to be paid by way of adjustment from one party to the other so that the parties are allocated the same amount. This is then documented in proposed Consent Orders, approved by the superannuation fund trustees, and then filed in the Family Court to be made legally enforceable.
Alternatively, the parties might agree that each keeps their own super, but there is an adjustment payment made from another source, such as joint savings or shares.
Of course, many cases are not so simple. Often there are multiple superannuation accounts, sometimes of different types involving different superannuation industry rules (although more than 80% of Australian super is estimated to be of the accumulation type). Next, even if an adjustment split is agreed, it may be necessary for this amount to be paid from more than one superannuation account, depending on the value of each interest.
Depending on the date of separation, there may need to be consideration of when is the appropriate date for valuation.
A further complication is whether one or both parties accumulated superannuation before the start of the relationship, and if so, whether the pre-cohabitation component should form part of the asset pool, and if so, whether that party should be given credit in the overall property division for making a superior initial contribution to the assets.
If you are considering separating from your partner, it is very important to seek independent financial advice from your accountant or financial adviser in addition to obtaining legal advice.
At Swaab, our experienced Family Lawyers will assess the particular facts and circumstances of your case and then advise on the available options. You will then be in a position to make an informed decision about the best course of action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.