Is My Superannuation Considered an Asset in My Family Law Matter?
This is a common question we get asked, and the short answer is yes. Your Superannuation interests will form part of your property pool when you are considering the division of assets following the breakdown of a marriage or de facto relationship. Following from this, it is also an asset that can be divided or ‘split’ if necessary, to ensure an equitable or appropriate property division between the parties. However, unlike assets such as real estate, cars and money in bank accounts, superannuation interests are treated a little differently. This blog will give you a brief overview of how the Family Courts deal with Superannuation interests and some important considerations to keep in mind. Here are four things you need to know:
1. First, superannuation can only be split by either of the two following ways:
a) By an order of the Family Court or Federal Circuit Court; or
b) By entering into a formal written agreement called a Financial Agreement.
If you are able to reach an agreement to split a superannuation interest, we generally don’t recommend our clients do this through a Financial Agreement. There are a number of drawbacks associated with Financial Agreements and an alternative exists that is simpler and involves less risk. If you are able to reach an agreement, the Court is able to make an order to split a superannuation interest by consent if an application is made. This is called a consent order and can deal with the rest of a property settlement as well.If you are unable to reach an agreement however, you will need to make an application to the court for an order that a superannuation interest be split.
2. Secondly, before seeking that a superannuation interest be split, you must first have the interest valued. In general, there are three common types of superannuation funds:
a) Accumulation funds;
b) Defined benefit funds; and
c) Self-managed superannuation funds (SMSFs).
If you have an accumulation fund, these are relatively easy to value. The value on the latest member statement will provide a close estimate. However, if you have a defined-benefit fund or an SMSF, then the superannuation interest will need to be valued to determine the actual value.
3. While we have mentioned that superannuation is an asset that can be divided or ‘split’, it is different to other property in that the regular laws relating to superannuation still apply. To illustrate, when superannuation is ‘split’ it does not automatically become converted into cash and divided between the parties. It instead remains subject to the rules relating to withdrawing superannuation – being that it is generally untouchable until retirement depending on the superannuation scheme.Instead what occurs when a ‘split’ is made, is that when a payment from the superannuation becomes payable to the member spouse, a certain amount will be paid to the non-member spouse. This ‘split’ can either be determined by a base amount (a specific dollar value), or as a percentage of the balance of the member’s superannuation fund. It is also possible that the ‘split’ can be transferred into a new superannuation account or rolled-over into an existing account for the non-member party. In this case, the superannuation split still cannot be received as a cash payment and can only be accessed by the usual criteria for releasing superannuation benefits.
4. Finally, you should note that you will need to give the Trustee of your superannuation fund at least 28 days’ notice of any proposed order to split an interest to ensure that the order complies with their requirements and is also correct. Once the trustee consents, and the order is made at Court, the trustee it is bound by the order.
If you have any questions relating to the contents of this blog, superannuation interests or regarding your property settlement, please contact us as we would be happy to assist you.
Our family lawyers are experienced and accredited specialists in family law and can provide expert and tailored advice relevant to your particular circumstances in order to guide you through these issues and many others after separation.