In the event of a divorce or separation from a de facto relationship, superannuation is treated as property under the Family Law Act 1975. However, it is managed a bit differently compared to other assets like cash, property, stocks, and insurance policies.
There are no hard and fast rules as to how superannuation is managed, as each case is unique and requires taking into account a range of factors to decide what is a just and fair outcome.
Some separating couples agree to divide the super among themselves, while others choose to defer the decision for a later point in time (i.e. once they reach retirement), or leave the state of their superannuation funds the way they are.
How both parties choose to approach the matter depends on their unique circumstances, and what they feel is a fair and just outcome.
De facto couples in Western Australia are not subject to superannuation splitting laws.
What does the law say about managing super after separation?
There are a few ways you can decide how to manage your superannuation after separation. By far, the two most common approaches are:
Binding financial agreement (BFA): A formal written agreement, where both you and your former partner agree as to when and how the superannuation is to be divided, if at all, and that independent legal advice has been sought by both parties and the agreement itself has been signed by a lawyer. From there, the agreement is used to apply to the court for a Consent Order and enforce the terms of the agreement.
Court order: Both you and your former partner cannot reach an agreement, either party can apply for a court order to split the superannuation. In this case, the court takes the matter into their own hands and evaluates the circumstances of each individual to decide how best to split the superannuation. As a result, there’s a chance both you and your former partner may not get exactly what you want.
Both approaches have their own pros and cons.
By creating a BFA, you both decide on your own terms how superannuation should be divided, including when and where the funds should be transferred to, and if any events must take place first before the arrangement goes into effect (i.e. a separating couple reaches the age of retirement first).
As a result, you get to reach an agreement on your own terms, not what the court thinks is fair.
However, creating a BFA can be detailed and complex process, resulting in a serious investment in both your time and money. Also, both you and your former partner must seek independent legal advice and sign the agreement for it to be legally enforceable. Otherwise, the agreement may be deemed invalid, resulting in further headache and stress later on.
On top of this, if you both sign a BFA, you may both lose the right to ask the Family Courts to decide on the division of property for you.
If you’re unsure which approach is right for you, speak to a family law specialist. They can evaluate the unique circumstances of your case, advise you on the legal avenues available to you, and determine your chances of a successful outcome.
Managing different types of superannuation
Another factor to consider is the type of superannuation both you and your former partner have. This is important, as the type of super defines how easy it is to valuate either the total amount of the super or the interest.
The three most common types of superannuation are:
Defined benefit funds, and
Self-managed superannuation funds (SMSFs)
For accumulation funds, all you have to do is valuate the latest member statement in order to get an accurate figure. For both defined benefit and SMSFs, the superannuation interest will need to be valued in order to determine its true value.
Your family law specialist can advise you on the best valuation approach, and how this may impact the outcome of your particular case.
What do the courts take into account?
If you approach the Family Law Courts, there are many factors they will take into account to decide how the superannuation should be split, if at all.
This includes not just the total amount (or the valued interest) of each parties superannuation balance, but also:
Each parties current financial circumstances
How much each individual party contributed to one’s superannuation fund, if any at all (i.e. should it be a 50/50 split, or a 30/70 split?)
Whether either party made ‘special’ contributions outside of just finances (i.e. one person played a much greater role in caring for the children).
Either of these deciding factors can influence how much the court feels either party should be entitled to receive as part of a superannuation split.
Do the superannuation provisions still apply in the event of a split?
What this means is, if both parties agree to split the superannuation, once the funds have been transferred into each person’s nominated super fund, the money is not immediately converted into the cash. The same provisions that applied before the split still apply now.
Therefore, neither party can access their newly acquired superannuation funds until the age of retirement, or until another condition is met.
If you have any questions regarding superannuation splits, and how the existing superannuation laws and the Family Act 1975 apply to you, contact Australian Family Lawyers today for expert legal advice and support.