When a couple divorces or separates, often property needs to be allocated appropriately to either party. One type of property that perhaps does not come immediately to mind in this situation is superannuation. This type of property is treated a little differently to other types of property in property settlements. This is because it does not convert to cash upon the settlement. Rather, it remains in trust and subject to superannuation laws. There are also specific rules about how superannuation interests are to be valued. In other respects, superannuation is treated in the same way as other property assets when determining a property settlement. For example, contributions made and future needs of the parties may be considered. This article sets out the different ways that superannuation splitting can be achieved after a separation.
Avenues for splitting superannuation
As with other aspects of property settlement, there are a few different ways that couples can settle on how superannuation is split after separation or divorce. These are as follows:
- The couple can agree on a binding financial agreement. Each party to such an agreement needs to obtain legal advice, and there are rules about what legal representatives need to advise on for such an agreement to be binding;
- The couple can agree on how their superannuation should be split and then seek a consent order from the Federal Circuit and Family Court (FCFCA) to have this agreement formalised;
- The couple can seek a court order for superannuation splitting.
Superannuation splitting and the legislation
The Family Court has the power to split superannuation interests between divorced or separated couples. This power is given in Part VIIIB of the Family Law Act 1975 (Cth). This part of the Family Law Act also covers how agreements in relation to superannuation splitting should be made.
The Family Law (Superannuation) Regulations 2001 provide further stipulations about superannuation splitting. Among other things, these concern:
- The manners in which superannuation interests are to be valued; and
- The manner in which superannuation splitting is to be completed
With the exception of couples who are separating from de facto relationships in Western Australia, the superannuation splitting laws apply for both married and de facto couples in Australia. De facto couples in Western Australia cannot split superannuation. However, in property settlements between these couples, the value of superannuation interests may be taken into account.
Valuing of superannuation interests
The first step to valuing your superannuation interests is to get the required information. You will need to apply to the trustee of the relevant superannuation fund with some required forms. These forms collectively are known as the Superannuation Information Kit and include:
- A form 6 declaration;
- A superannuation information request form; and
- Superannuation information form.
Your superannuation fund may charge you a fee for providing the required information.
Once you obtain this information, this may be all the information you need to complete a valuation of the superannuation. The legislation and regulations stipulate how valuations should be done. However, there are different types of superannuation and different types of valuation methods. For example, self-managed superannuation funds are usually valued with the assistance of an accountant. There are also certain superannuation funds that the Commonwealth Attorney-General has allowed to use different valuing methods. It is prudent to seek professional advice when valuing your superannuation interests.
Payment splitting and interest splitting
The agreement or order in relation to superannuation is an agreement for a split of payments. This split of payments will take place when the superannuation interest becomes payable. This is usually when a condition has been met for the release of funds, such as the retirement of the spouse who is the member of the superannuation fund. Once this condition has been met, a payment will be made to the spouse who is not a member of the fund.
There are circumstances where an order or agreement for a payment split has been made where it is possible for a new interest to be created for one of the spouses. One of the spouses may also be able to roll-over their interest to a different super fund. This approach is known as interest splitting. The benefit of this approach is that it allows a spouse who is not a member of a superannuation fund to access their benefits without requiring anything from the member spouse. The regulations that cover when interest splitting is allowed are the Superannuation Industry (Supervision) Regulations 1994 and Retirement Savings Account Regulations 1997.
Keeping the superannuation fund informed
If you are seeking a court order about a superannuation splitting, you must inform the trustee of the relevant superannuation fund of your intention. An opportunity must be given to the trustee to attend at any relevant court hearing and object to any relevant order.
After an order has been made about superannuation splitting the trustee must be provided with a sealed copy of the superannuation splitting order.
If you require legal advice or representation in any legal matter, please contact Armstrong Legal.