In most property settlements, each party will have superannuation entitlements with one or more superannuation funds. After the breakdown of a marriage or de facto relationship, it is prudent to obtain advice as to whether to seek an adjustment of superannuation interests, including pensions in payment phase.
Is it necessary to value superannuation?
One of the first steps in the property settlement process is to identify and value all of the assets, liabilities and superannuation owned by each party, or in which they have an interest. It is generally not necessary to value superannuation funds, except where one party has an interest in a defined benefit scheme or fund. The value of a defined benefit fund is determined by reference to a number of considerations, such as the salary of the member spouse over a certain period of their employment, and other factors such as age and gender.
It is prudent to value defined benefit interests in superannuation, so that parties negotiating a property settlement have certainty about the value of superannuation interests.
Can superannuation be split by the Court?
The Court has the power to order that superannuation entitlements, and pensions, be split by a superannuation fund. Before the Court can order that a superannuation interest be split however, the Court must be satisfied that it is just and equitable for there to be an adjustment of the superannuation pool.
Superannuation can also be split by entering into a Superannuation Agreement or Binding Financial Agreement pursuant to the Family Law Act.
What is the effect of a superannuation splitting order?
A superannuation splitting order could provide for three different outcomes of a superannuation split:
1. To create a new membership with the superannuation fund for the incoming spouse, where the superannuation interest is held;
2. To rollover the superannuation interest into another fund; or
3. To payout the superannuation interest as a lump sum payment.
Superannuation splits must occur in accordance with the Rules of a superannuation fund. For example, some superannuation funds will not permit a non-member spouse to make employee or voluntary contributions to their superannuation fund, whereas the member spouse may be permitted to make those contributions to their own superannuation fund.
How is superannuation treated in a property settlement?
In most cases, a superannuation interest will be treated as a capitalised asset available for division in the property settlement.
This approach is not appropriate however in cases where a party has an entitlement to a non-commutable invalidity pension, which is a pension that is not able to be split. It is well-settled in case law that as such pensions are not able to be split, they should be treated as a permanent and ongoing financial resource available to a party as an ongoing income stream, as opposed as being treated as a capitalised asset which is available for division.
Superannuation splitting in family law matters is a highly specialised and technically complex area of law. You should seek specialist advice about superannuation splitting if you are considering it as part of a property settlement with a former spouse or as part of a pre-nuptial agreement, known as a Binding Financial Agreement.
If you are seeking advice in relation to property settlement matters, contact us to arrange an appointment on (02) 6225 7040 or by email on info@rmfamilylaw.com.au or get started now online to make an appointment with one of our experienced family lawyers.
Author: Margot McCabe