What Happens To Your Super If Your Relationship Breaks Down?
In December 2002 the Federal government enacted legislation to permit the division of superannuation interests upon relationship breakdowns bringing Australia into line with most western jurisdictions with respect to the equitable distribution of property and assets accumulated by a couple during a relationship. From that time on superannuation has been treated as property for Family Law purposes.
Before that legislation the options under the Family Law Act were limited to deferring any claim until the member’s superannuation became payable or calculating the present value of the superannuation interest as a “financial resource” and adjusting the non-superannuation assets between the parties to the relationship.
The current law permits the splitting of a party’s superannuation interest and the transfer of a portion thereof to the other party’s superannuation fund.
Splitting Your Superannuation
Superannuation can be split as follows:
- By a formal Financial Agreement signed by both parties and by their solicitors certifying that each has had independent legal advice about the agreement.
- Seeking Consent orders from the court to split superannuation.
- If agreement cannot be reached by seeking a court order for the superannuation to be split.
There are many different types of superannuation funds and the regulations to the superannuation splitting laws provide the manner in which the superannuation interests are valued. That value is taken into account by the parties and/or the court in determining the division of property following the breakdown of a relationship.
In appropriate matters a payment flag order can be made. A payment flag is like an injunction on a superannuation entitlement which directs a trustee not to make a splitable payment without leave of the court and requires the trustee to notify the court within the specified period of the next occasion when a splitable payment becomes payable.
Before a splitting order can be made procedural fairness must be given to the trustee of the superannuation fund. A copy of the proposed agreement or order must be given to the trustee not less than 28 days before the agreement or orders are made with the intention being the trustee is permitted to object to the orders being made by written notice given within that 28 day period. The trustee’s discretion to object to the orders being made is usually only exercised with respect to the form and not the content of the agreement or order.
Splitting orders are able to be made in relation to self-managed superannuation funds but care must be taken to ensure that the superannuation interest is protected (perhaps by a flag order) until such time as the split has been effected, given that the members of a self-managed super fund are usually the parties of the relationship.
There is no presumption that either party is entitled to any share or portion of the other person’s superannuation interest. It is another asset in the list of assets which can be the subject of either orders of the court or agreement between the parties.
Division of Assets
The division of assets between parties following the breakdown of a relationship is usually determined by a consideration of the respective contributions made by the parties and their future needs. Any superannuation interests brought into a relationship will be considered as pre-relationship or initial contributions of that party.
The provisions of the Family Law Act are currently (and constantly) under review. Moves are afoot to simplify the approach to property division and there have been recommendations made by the Australian Law Reform Commission in this regard including a recommendation to amend the Family Law Act to provide a presumption that the value of superannuation assets accumulated during relationships are to be split evenly between the parties so that the portions accumulated before and after a relationship shall be retained by the party who made the accumulation.
Care should be taken and expert advice sought about the manner in which the Family Law provisions impact upon superannuation interests before any formal agreement or application is made with respect to those superannuation interests.
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