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Many people do not consider the impact of a superannuation split or the failure to receive a superannuation split following the breakdown of their marriage or relationship until it is too late.
Superannuation is the regular payment into a fund by an employee towards a future pension that is accessible upon the attainment of retirement age, or qualifying for access through other factors at a time earlier.
Superannuation for the purposes of a family law property settlement is to be considered as the property of the party and to be valued as though it is an accessible asset. Prior to a superannuation splitting Order being made, the Trustee of the Superannuation Fund must consent or at least have 28 days’ notice of the proposed Orders to be made to allow for the Orders to bind the Trustee and require the Trustee to implement the Orders. When Orders are proposed to be made by consent and include a superannuation splitting Order, the Court will request confirmation as well as the evidence of procedural fairness having being sought from the Trustee.
Superannuation that is split from one spouse to another will continue to be subject to superannuation laws, for example it has the same criteria for access, either retirement or some other early qualifying factor which will depend on each superannuation fund.
A superannuation benefit is “just like” any other asset to be considered in a financial settlement. The benefit will be added to the available assets for distribution and form part of the net asset pool available for division between the parties upon the breakdown of their relationship. In some cases, superannuation may be considered in a separate pool or may be considered as another asset in the global asset approach to property settlement, with the other assets such as property, shares, motor vehicles, and mortgages and the like.
Superannuation splitting Orders are not made in every case. When parties reach an agreement they may include a superannuation split in favour of one party or may agree not to split superannuation so that one party receives more cash or liquid assets rather than superannuation which is tied up in the Superannuation Fund until retirement or by meeting the criteria for early access to the funds.
There is quite often a disparity of superannuation balances between male and females. This is for a number of reasons such as;
It is important to always consider the possibility of a superannuation splitting order. Women tend to have lower superannuation balances by the time they reach retirement. They tend to retire earlier, and live longer, so in turn require more superannuation to live off in retirement.
Presently the superannuation guarantee from employers is frozen at a mandatory level of 9.25% per annum of an employee’s annual salary. Previously superannuation guarantees had been legislated to increase over a period of time to 12%, however this is frozen for consideration until July 2025.
Things to consider
Upon the separation or divorce from your former partner, you should always consider the impact of your present financial circumstances on your future, and if possible to obtain financial planning advice. This may include advice from a qualified financial planner or advisor to assist you in working out what assets are most suited to you and your goals following the breakdown of your relationship. This may include a decision about whether or not to retain a non-liquid asset such as a property or retaining more superannuation or a highly geared asset which may have future taxation and financial implications.
You should consider and ask questions about superannuation entitlements and whether or not it is appropriate to seek a superannuation split from your spouse’s superannuation, or whether you should propose a split be made to your former spouse.
It is also important to consider the appropriate valuation of a superannuation entitlement upon the breakdown of your relationship just like it is important to value any other assets on the Balance Sheet available for division. Some superannuation entitlements have complicated valuation schemes such as defined benefit schemes or those in a pension phase.
You should consider instructing an appropriately qualified Valuer with particular expertise in superannuation entitlement to ensure that an appropriate value is placed on the Balance Sheet to correctly reflect the value held by the member spouse in the Superannuation Fund.
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