This article will outline superannuation payment splitting in the Family Law Act 1975. Superannuation payment splitting is a process in Australia where separated and divorced parties can divide their accumulated superannuation savings. This process usually happens during the property settlement phase of a divorce which typically involves the division of a couple's:

  • Family home
  • Cars and other household properties
  • Money in banks
  • Real estate
  • Interests, shares, and life insurance policies

The payment splitting process allows a portion of one partner's superannuation benefits to be transferred to the other partner's superannuation account. This can be done by way of a court order, a financial agreement, or a payment flag.

A superannuation payment flag is placed on a party's superannuation entitlement by the trustee of the superannuation fund. The amount that can be split is limited to the "splittable payment". This is typically the balance of the superannuation account at the time of separation or divorce.

The purpose of superannuation payment splitting is to ensure that both partners receive a fair share of their combined superannuation savings. Moreover, it enables each partner to continue to build their own superannuation savings after the separation or divorce. Read on to know more about the superannuation payment splitting Family Law Act.

Section 90XI: Operative Time for Payment Split

What's the operative time for a payment split under a superannuation agreement or flag-lifting agreement? According to Section 90XI, this period begins on the fourth business day following the day a copy of the agreement is served on the trustee. The operative time is also usually accompanied by a:

  • Copy of the divorce order that has terminated the marriage; and
  • Separation declaration in case the parties are not divorced and if a separation declaration is not included in the superannuation agreement.
  • A document that contains the method for calculating a base amount. The base amount is used to calculate the entitlement of the non-member spouse under the regulations.
  • A declaration for the purposes of an operative time for a payment split

A separation declaration should not be made more than 28 days before its service on the trustee. This is important to take note of when discussing the superannuation payment splitting Family Law Act.

Section 90XJ: Payment Splits Under Superannuation or Flag Lifting Agreements

According to Section 90XJ, this section applies to the following instances.

1. There is a percentage-only interest identified in superannuation or flag-lifting agreements. However, these agreements must specify a percentage that applies:

  • For the purposes of Section 90XJ superannuation payment splitting Family Law Act (1)(i)
  • To all splittable payments in respect of the interest

2. There are no percentage-only interests in superannuation or flag-lifting agreements? The agreements must then specify:

  • An amount as a base amount in relation to the interest for the purposes of Family Law Act Part VIIIB
  • A method by which such a base amount can be calculated at the time when the agreement is served on the trustee.
  • A percentage that is to apply to all splittable payments

3. The marriage or the de facto relationship broke down at the operative time. The Family Court in Western Australia does not currently have the authority to make superannuation splitting orders for de facto couples. Hence, It's important for separating de facto couples to seek a family lawyer's advice for their options.

4. The interest is not an unsplittable interest.

Provisions That Apply to the Interest at the Operative Time

According to Section 90XJ of the superannuation payment splitting Family Law Act, the following applies whenever a splittable payment becomes payable in respect of the interest:

  • The non-member spouse is entitled to be paid the amount calculated in accordance with the regulations. If not, the calculated amount must have a specified percentage or an amount calculated by applying the specified percentage to the splittable payment.
  • There is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made if not for the payment split.

What Happens to Superannuation After Divorce?

It's also important to talk about what happens to superannuation when discussing the superannuation payment splitting Family Law Act. Splitting does not result in the conversion of superannuation funds to cash assets, and the funds remain subject to superannuation laws. Equalisation also does not always follow from superannuation splitting.

The former couple can negotiate a superannuation split that is tailored to the parties' specific situation.

For example, one spouse may want to use a larger portion of the cash assets in the property pool to buy a home. Whereas the other spouse may want to keep the majority of their assets in superannuation. Separating or divorcing couples have three options for splitting their superannuation. They may either:

  1. Enter into a binding financial agreement to split superannuation; or
  2. Seek consent orders to split their superannuation
  3. Seek a court order if they can reach an agreement about splitting their superannuation.

Superannuation Payment Splitting Family Law Act: Example

Let's use an example of superannuation instances in divorce matters. Kyle and Jane have been married for 20 years, but have decided to get divorced due to irreconcilable differences. During their marriage, they both contributed to their superannuation funds. Kyle has a balance of $200,000 in his superannuation account, while Jane has a balance of $150,000 in hers.

Under Australian family law, superannuation is considered a type of property. Therefore, superannuation is subject to division during a divorce. Kyle and Jane must agree on how they will split their superannuation, taking into account factors such as the:

  • Nature and value of the superannuation interests;
  • Income, property and financial resources of each party;
  • Age and health of each party;
  • Financial needs and obligations of each party;
  • Standard of living of each party; and
  • Duration of the marriage and any other relevant factors.

During the property settlement phase, Kyle and Jane had a dispute regarding their superannuation. Jane does not want to wait until John retires to receive her share of his superannuation. Instead, they agree that John will make periodic payments to Jane from his superannuation fund until she has received her share. They then sought legal advice from a family lawyer and were able to:

  • Determine the appropriate amount and frequency of the payments
  • Agree that John will make monthly payments of $1,250 to Jane for 10 years, which will total $150,000. This payment will balance the property settlement phase of their divorce.
  • Implement their agreement in a binding financial agreement

Importance of Seeking Legal Advice

We hope this article has given you the necessary information about the superannuation payments Family Law Act. Our lawyers at JB Solicitors can help disputed couples determine their fair share of superannuation savings through our mediation and arbitration services.

We can also aid in other divorce matters other than superannuation splitting such as parenting arrangements, spousal maintenance, and domestic violence.

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.