The treatment of superannuation in a property settlement between separating couples was historically a problem area for the Family Courts because of the special qualities of superannuation interests. Because of strict rules governing superannuation interests, it has sometimes been difficult to arrive at a settlement which is fair to both parties.
Property settlements dealt with under the Family Law Act can divide superannuation along with other assets as part of property settlement. As most people have superannuation, this has a significant effect on most people’s property settlement.
There are varying approaches on valuing and determining the division of superannuation interests in family law matters. Each case is approached and determined based on its own specific circumstances.
It is important to seek advice concerning the valuation of either your own or your spouse’s superannuation interest before agreeing on a property settlement.
Accumulation funds, also known as industry funds, are the most commonly held superannuation interests. The value of this type of superannuation interest is usually determined by a recent member statement or a completed superannuation information form.
Self-Managed super funds
Self-managed super funds are becoming more common, particularly as a way to invest in property. However, unlike other types of superannuation, the diverse nature of the self-managed superfunds and the property they own, make a standard valuation regime impossible. An expert is generally required to value a self-managed super fund.
Defined Benefit Funds
To value a defined benefit superannuation fund, you will need to send a Form 6 or a Superannuation Information Request Form to the specific fund. Information provided by the fund regarding a superannuation interest may have to be valued by an Actuary to determine its value for family law purposes. Defined Benefit valuation formulas are usually based on a combination of factors including:
- The age of a member;
- A member’s average salary leading up to retirement or the value of the super at retirement; and
- How long a member has worked for the employer.
How do you split superannuation?
Superannuation interests are split by a splitting order or agreement, usually contained within Court Orders (made by consent or after litigation) or a Binding Financial Agreement (BFA).
After the Orders or BFA are served on the Trustee of the superannuation fund, the Trustee will arrange for a payment from the member spouse’s superannuation interest to a super fund nominated by the non-member spouse. The payment may be expressed as a specific amount or as a percentage of the member spouse’s interest.
A superannuation split cannot be converted to cash. The non-member spouse is not able to access the superannuation they receive until retirement or hardship.
Contact us today for help with valuing superannuation interests and your potential entitlements.