How do the Family Courts treat Superannuation?

In property settlements in Australia, Superannuation forms part of the property pool. Each party must make full disclosure of the current amount of the benefit in their Superannuation schemes.

The Four-Step Approach to Resolving Property Divisions

In summary, the Courts traditionally follow a four-step pathway to work out how to divide the total property of the separating couple.

Step 1: Identify and value all property;

Step 2: Work out each party’s contribution both financial and non-financial, role of homemaker and parent;

Step 3: Analyse whether one party will have a greater future financial burden such as caring for children, retraining after being a stay-at-home parent and/or whether a party has a greater earning capacity; and

Step 4: Establish that the effect of the proposed property division is just and fair to all parties.

For a further discussion of how the Family Courts apportion the property pool when making Property Orders please see our article “How Does the Court Work out Property Division Between a Separating Couple?”

If Superannuation is Property, will I get Cash in the Bank?

Some couples do not split their superannuation interests but keep their own superannuation benefits as they have enough in other property and/or cash to allow for an equitable adjustment of the property pool.

However, if splitting orders are made, this does not mean that the superannuation will be transferred to a party as cash.

Superannuation remains subject to superannuation laws and is held in a Superannuation Fund until retirement or a specific event such as a disability allows for the benefit to be drawn.

Superannuation Splitting

How the superannuation is apportioned when the Courts make property orders may depend on factors such as the age of the parties, their current employment and future career prospects and the type of Superannuation benefit involved.

If, for example, you are only in your 30s and you have an immediate need to find a new home for yourself and your children, you may decide to accept a lesser share of the Superannuation Benefits so that you can receive more of the cash of the property pool.

The Court may make Super Splitting Orders in relation to Accumulation Funds, Defined Benefit Funds, Account-based Pensions, Self-managed Super Funds and Lifetime Pensions such as pensions arising from a Defined Benefit Fund.

Valuing Superannuation 

Each party or their legal representative must write to the Trustee of the Superannuation Fund for an up-to-date valuation of their superannuation interests.

You must complete a Form 6 Declaration to the Trustee that you are the member and are making the request in the light of Part VIIIB of the Family Law Act 1975 in preparation for a court order as well as Superannuation Information Request Form and Superannuation Information Form.

There may be a fee involved which would be paid to the superannuation fund for providing this information.

Self-managed Superannuation Funds are usually valued by an accountant expert in this area.

Procedural Fairness to the Trustee of the Superannuation Fund

You and your ex-partner can agree to how your property is to be divided either by agreement when you file an Application for Consent Orders or by Court Orders made at a hearing.

Not only must you tell the trustee of your superannuation fund about the orders you are seeking, you must also give the trustee the opportunity of responding. If you go to a hearing the trustee must have the opportunity to attend that hearing and if needed, to object to the orders sought.

In this way, you are according the trustee “procedural fairness” which is mandatory before any superannuation splitting orders can be made.

In addition when the orders are made, the trustee must be provided with a sealed copy of the order.

Relevant Terminology

Base amount: The Orders may allocate to the non-member of the Superannuation Fund a base amount which is a dollar amount to be transferred to the non-member rather than a “percentage amount” split of the superannuation interests.

Flagging Order: This is when there is an order to stop payments being made until a condition of release (such as retirement) has been met. In a Defined Benefit Scheme, the trustee cannot with certainty value what the interest is really worth. Hence, the flagging order is made. An example would be when the member was 2 years from retirement. The separating couple may then wait for the 2 years to confirm what the member’s interest is worth.

Operative time: When making Super Splitting Orders, the order must include the operative time which is generally four business days after the Orders were made.

Percentage split: This is when the super splitting order is expressed as a percentage division of the payment rather than a base dollar amount.  

Rollover: The super splitting order may allow the non-member’s amount to be transferred to be rolled-over into another superannuation fund.

Superannuation in General

When seeking to finalise your property settlement with your ex-partner, it is important to ensure that the orders you are seeking in relation to your superannuation benefit are valid orders that the Court can make and also workable so that they fit into the new direction your life is taking.

Superannuation is a specialised field and you need to know where your property settlement may refer to Superannuation Law, Tax Law in relation to Self-managed superfunds and Family Law in relation to the just and equitable division of your property pool.

If you have any questions and are unsure how your superannuation benefit may be treated by the Family Courts, please contact us so that we can advise you of the implications within the Family Law context and also if you need more specialised assistance with an accountant or similar professional advisor.

This article is for information only.