Superannuation is an asset
Superannuation is an asset of the parties, like a house, cars, or furniture. Therefore, it forms part of the overall property settlement between you and your previous partner. It must be considered.
For some years now, it has been legally possible to “split” superannuation. This means that, in the breakdown of a relationship, it is possible (by way of Court Order, or an appropriate Financial Agreement) to take super from one party’s superannuation fund and put it into the other party’s fund.
How is a Superannuation Split calculated?
In most family law cases super is split on a 50/50 basis. The Super paid to each party during the relationship, is totalled then split in half, for example:
- Mrs S was paid Super during the relationship that totals $75,000.00. Her fund is with Hesta. Mr S was paid Super during the relationship that totals $65,000. His fund is with CBUS.
- The two totals are then added together to obtain the total Super earned by both parties during the relationship, i.e. $65,000 + $75,000 =$140,000.00. This total is then halved to work out what 50% of the total is. In this case 50% of the Super would equal $140,000.00 x 50% =$70,000.00. On a 50/50 super split each party should therefore receive super totalling $70,000.
- As Mr S already has $65,000.00 in his Cbus fund the “super split” from Mrs S’s Hesta fund would be $5000. Mr S’s fund would increase by $5,000, and Mrs S’s fund would be reduced by $5,000. They would both end up with $70,000.00 in Super.
How is a Super Split done?
A super fund can only make the Super Split if they are provided with:
Document 1 - Consent Orders or Orders from the Family Court or the Federal Magistrates Court.
Document 2 - An appropriate Financial Agreement, prepared and signed by you, your legal representative, your partner and their lawyer, which complies with the Family Law Act.
A plain letter, or request to the Super fund will not be accepted. The only documents that can enable a Super Split are the documents listed above orders or a financial agreement.
Notifying the Super Fund
Any Super Split requires the parties or their legal representatives to first notify the fund of the proposed split. In the above example the only fund that needs to be notified is the Hesta fund, as the super split is only coming from this fund. You would not be required to notify the Cbus fund.
The super fund would need to see a draft of the proposed super splitting Orders, or Financial Agreement before they will agree to the split. They must satisfy themselves that their fund can carry out the split.
Most Super funds are very particular about super splits and insist on very specific wording in any Orders or Financial Agreements. If the wording of a super split is incorrect, the fund will be unable to complete the split.
What happens to Super paid before your relationship, or after separation?
This is a “grey area of the law”, where the Court has a broad discretion. Time can also impact on the likely outcome.
For example (using the example above) if Mrs S had earnt $50,000 of her Super with Hesta before the parties commenced living together, she could argue that only the balance of her Super (being $20,000 paid after the started living together)) should be included in any super split.
Super paid after separation is also complex. In some cases, it may be possible to argue that post separation superannuation payments shouldn’t form part of the overall superannuation split.
However, if for example Mrs S continued to have the primary care of children of the relationship, it may be seen that she continues to indirectly contribute to Mr S’s post separation superannuation payments. By caring for the children, Mrs S frees up Mr S’s time to work, earn an income, and be paid superannuation.
Mrs S had superannuation totalling $2,000 before the parties started living together, it’s unlikely that this small amount would be excluded from the overall superannuation split.
When considering superannuation in family law matters the following factors need to be considered:
- When did each party start receiving superannuation payments?
- Was this before, after or during the party’s relationship?
- What are the facts surrounding the payment of superannuation after separation?
- How much time has elapsed since separation?
How do we value a superannuation fund?
Most of the time an annual statement from the superannuation fund is enough to accurately value the fund. A valuation is crucial when working out the total superannuation paid to each party in the relationship. For the purposes of valuing superannuation, it is customary to use the current day value, not the value as at separation.
However, some superannuation funds require a specific valuation. This can be obtained from the superannuation fund (at a small expense). Your legal representative will need to apply for and obtain a Form 6 - Superannuation Information Statement. The Form 6 provides the necessary valuation of the fund.
With respect to some Defined Benefit superannuation funds (which are rare) the fund may need to be valued by an actuary (mathematician). There would be a cost for this valuation.