Superannuation Splits (WA)
When a couple separates in Australia, their asset pool must be divided in a fair and equitable fashion. In most Australian states, the marital asset pool includes one or more superannuation accounts. These accounts may be divided through a court-ordered splitting order to allow the balance of a superannuation fund to be shared between the couple if that is fair and equitable. This superannuation split is possible for both divorcing marital couples and separating de facto couples across Australia, with one noticeable exception. In Western Australia, the courts cannot order that a superannuation account be split for a separating de facto couple. As such, when a de facto couple in Western Australia separates, each person retains their entire superannuation account. There is currently legislation before Parliament that will rectify this area of law and allow for superannuation splits in WA.
Western Australian Anomaly
The reason for this disparity is that Western Australia is the only jurisdiction that retained power over matrimonial and de facto law. Every other state or territory in Australia operates under the federal family law system set out in the Family Law Act 1975. As the Western Australian government cannot make law in relation to superannuation, the Family Court Act 1997 does not cover the splitting of superannuation accounts, an arrangement that has long been possible under the federal legislation.
Western Australia attempted to resolve this problem in 2006 by offering the Commonwealth legislative authority over the narrow issue of dividing superannuation accounts for separating de facto couples. The two parties were unable to come to an agreement about the scope of the power to be referred to the Commonwealth. As it stands today, a potentially inequitable outcome can occur, especially for long-term de facto couples in Western Australia.
Number of Couples Affected
A de facto relationship is defined under the Family Law Act 1975 as a relationship between two individuals who are “living together as a couple on a genuine domestic basis” (s 4AA). This legal definition is inclusive of both genders, meaning that an unmarried LGBTQI couple living on a genuine domestic basis is classified as de facto. In the last census over 200,000 people in Western Australia identified themselves as living in a de facto relationship.
Superannuation Split WA: Divorcing Couples
It is important to note that the anomaly only exists in relation to de facto couples. Divorcing couples in Western Australia benefit from a similar system of superannuation division to the rest of Australia. That is, the couple either privately agrees to a certain division of assets, or the court makes an order that can include the splitting of superannuation into two accounts if this is required to achieve a just and equitable outcome.
Superannuation Split WA: De Facto Couples
In Western Australia when a de facto couple separates, an unvested superannuation account is viewed as a financial resource and not property within the asset pool. As such, the Family Court can adjust the division of assets to compensate for one member of the couple retaining their superannuation entitlements, but this compensation is not always adequate when the superannuation fund comprises the largest share of the asset pool. For instance, if a superannuation fund of $300,000 is in one spouse’s name, and the remainder of the asset pool only totals $100,000, even if the court allocates all the remaining assets to the other partner it is impossible to ensure an equal division of assets.
Currently, the law as it relates to de facto couples in Western Australia is vulnerable to misuse. One party in a de facto relationship can divert a greater portion of their resources into their superannuation fund, thereby shielding it from being divided in a property settlement. This inequitable result is further compounded if the other partner is actually entitled to a greater portion of the total asset pool because of their future needs. For instance, if one party has primary care of children, or there are other factors that will impact on their future earning capacity, then they would be entitled to a greater portion of the settlement. This division may be impossible if the other party has disproportionately vested assets into a superannuation account.
Proposed Law Reform
The Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy Bill) 2019 proposes that limited power be conferred on the Commonwealth in respect of superannuation issues in family law matters for separating de facto couples in Western Australia. The amendment would allow the Family Court of Western Australia to apply the federal Family Law Act to superannuation splits for separating de facto couples in Western Australia.
For more information on the law relating to superannuation splits amongst separating couples in Western Australia, or advice on property settlements in general, please call Armstrong Legal on 1300 038 223 or send us an email to make an appointment