Does My Superannuation Form Part of a Property Settlement?

Outside of any property they own, superannuation is the largest asset most Australians now own. For that reason, the place of superannuation in a family law property settlement between two people whose relationship has ended is increasingly important.

Under Australia’s Family Law Act 1975 (‘the Act’), superannuation is considered ‘property’ so that when a couple decides to separate or divorce, their superannuation interests are included in the overall property pool that is subject to division between the parties (but is treated differently to other non-super assets).

The inclusion of super within the property pool recognises its importance as an asset that contributes to a person's financial future and security. Issues frequently arise where one half of the couple may have been the ‘breadwinner’, accumulating superannuation over many years while working, while the other partner spent years out of the workforce raising children and maintaining a household. After the split, the domestic partner has legitimate concerns about how they will fund their lifestyle in retirement without super funds to call on.

How is superannuation split between ex-couples after separation or divorce?

Dividing superannuation between two parties who have decided to go their separate ways can be done as part of a property settlement or as a stand-alone arrangement. Not all ex-couples will see the benefit of superannuation splitting. Super is subject to different rules to other financial assets including that the benefit cannot be accessed by either party until retirement age. One partner may prefer to hold on to their super benefit but agree that the other party should gain the benefit of non-super assets, such as a house. For this reason superannuation splitting becomes more relevant for ex-couples approaching retirement age.

The most common methods for dealing with superannuation after a relationship break-down are:

• Entering into a Binding Financial Agreement either before, during or after the relationship which formalises a couple’s agreement on splitting superannuation upon separation or divorce.
• Applying to the court for consent orders to formalise an agreement between the ex-couple to split superannuation.
• Where the two parties cannot reach an agreement on splitting superannuation, seeking a court order to do so after initiating property settlement proceedings.

Superannuation Splitting Agreement Form

A first step in any of the methods listed above is obtaining an accurate valuation of the parties’ superannuation interests. A professional actuary or financial expert may be required for this purpose. An eligible person – being the superannuation fund member, a member’s spouse, or any person who intends to enter into a superannuation agreement with the member – can also apply to the trustee of a superannuation fund for information on the value of the member’s fund or material that will help them calculate its value.

Both parties are required to receive independent legal advice before coming to an agreement about superannuation splitting through the methods described above.

Finally, the proposed super split must meet the Act’s requirement of being ‘just and equitable’. The court considers various factors when it is called on to make an order, including the parties' financial contributions, non-financial contributions (such as homemaking or child-rearing), and future needs and responsibilities.

The issue of procedural fairness

Procedural fairness is an important element in family law proceedings, including when dealing with the division of superannuation. The concept ensures both parties have a fair opportunity to present their case and that decisions are made impartially.

Key aspects of procedural fairness in superannuation splitting during family law proceedings includes:

Full financial disclosure: Both parties are required to provide full and accurate financial disclosure, including all superannuation interests, in a timely manner. Failure to do so can result in penalties and adverse findings by the court.

Access to information: Each party should have access to information about the other party's superannuation. This may include superannuation statements, valuations, and other relevant documents.

Independent legal advice: As mentioned above, both parties should seek independent legal advice to understand their rights, obligations, and the proposed superannuation split's implications fully.

Each party must also have the opportunity to present their case and be heard in court, including providing evidence, calling witnesses and cross-examining the other party’s witnesses, if necessary.

Once the court issues Consent Orders or approves a Binding Financial Agreement, it is essential that both parties comply with the terms outlined in these documents. Failure to do so can result in legal consequences. It should be noted this process can take time to finalise - before making a super splitting order, the court requires proof that the trustee of the super fund has been provided a proposed splitting order to review and ensure it complies with the fund’s rules.

Discuss your situation with experienced family lawyers

The decision to split superannuation in the event of separation or divorce needs to be considered in light of how the total property pool would be divided and with each party’s individual circumstances and stage of life in mind. The advice of experienced lawyers such as our team at Frigo James Legal is vital to navigating the complexities of superannuation splits and property settlements to ensure couples can resolve their financial matters efficiently and move forward with their lives after separation or divorce.