Most working Australians have some superannuation and for many their superannuation can be quite a substantial part of their financial future. Before 2002, dealing with superannuation entitlements often posed problems in family law financial settlements because there was no ability to divide them. The outcome usually was that the party with the greater superannuation would get a lesser share of the other property to compensate for the other party not being able to access the greater superannuation fund.
This lead to disputes about how much adjustment should be made in today's money in exchange for tomorrow's retirement benefits.
The 2002 changes to the law allowed superannuation to be "split" so that, for example, a portion of one party’s superannuation would become the other party’s superannuation so as to achieve a more equitable division of the assets.
A split of superannuation can be achieved either by a court order or by a Superannuation Agreement between the parties and so long as the required formalities are met, the fund manager must implement the division.
How does it all work in practice? Once the fund manager receives the paperwork, the superannuation benefit in question must be divided as required and a separate interest is created in name of the party in whose favour a split is made. The other interest is of course reduced by the same amount .
The party receiving the split may move the new entitlement to a fund of their choice and if the split comes from a Self-Managed Fund, that party may have to roll it over into another fund. Whatever arrangements are made, the split amount remains superannuation, and can only be accessed in accordance with the superannuation rules which the government has established.
Since 2009, de facto and same sex couples in most states come under the Family Law Act and so splits are available for them also in appropriate cases.
In some cases there may be situations where a party with reasonable superannuation benefits may try to get at those benefits in order to prevent a likely split. In such a case, a court can make what is known as a flagging order which has the effect of preventing any dealings with the benefits without court permission.
Most Australians have what is known as an accumulation fund where the benefits are the contributions to their fund as well as the earnings on those contributions. There are also funds known as defined benefits funds where regardless of contributions, the benefit is a percentage of final salary. Such funds are usually for employees of the government or very large employers.
The ability to divide superannuation is an important part of seeking to achieve a fair and appropriate outcome in property matters, but it has added a layer of complication to the process no matter if the outcome is achieved by the court process or by a negotiated settlement.
For assistance with Family Law matters, phone Dominic Wilson, Managing Partner of Craddock Murray Neumann, on (02) 82684000. We have Family Lawyers who are certified by the Law Society of New South Wales as Accredited Specialists in Family Law.