Splitting superannuation for family law purposes in Australia involves a legal process that allows separating couples to divide their superannuation entitlements as part of property settlement between them. This process is governed by the Family Law Act 1975 (Cth) and the Superannuation Industry (Supervision) Regulations 1994 (Cth).
So you have reached an agreement with your former spouse that as part of the terms of a property settlement you will split one or both of your supernation interests in favour of the other. So what next?
The process involves a few steps before a split can be carried out.
- Valuing Superannuation
Before splitting superannuation, it must be accurately valued. Most super funds provide a valuation service upon request. For accumulation funds, the balance shown on the member’s statement is typically used. However, for defined benefit schemes, a more complex actuarial valuation may be required.
- Obtaining the consent of the superannuation fund to carry out a split.
Once you have reached an in principle agreement you will need to notify the relevant superannuation fund of the proposed split and confirm that it is able to be carried out. The superannuation fund will advise in writing if the terms of the proposed split can be given effect and if not the reasons why.
Agreement or Court Order
Once the superannuation fund has indicated that it could carry out the terms of the proposed split- Superannuation can be split either by:
- Superannuation Agreement: Both parties agree on how to split the super and formalize it in writing. This agreement must comply with legal requirements, including obtaining independent legal advice for each party. An agreement can be reflected in a financial agreement or a Consent Order made in the Federal Circuit and Family Court of Australia (the Court).
- Court Order: If no agreement is reached, either party can apply to the Court for orders at to property settlement including a superannuation splitting order. The court will consider various factors, including the length of the relationship, contributions made by both parties to the acquisition, maintenance and conservation of the assets of the relationship, and the respective future needs of the parties.
- Notifying the Superannuation Fund
Once an agreement is reached or a court order is obtained, the relevant superannuation fund must be notified. This is done by serving the fund with a copy of the agreement or court order. The fund will then implement the split as specified.
- How the Split Works
Superannuation can be split by creating a new account for the non-member spouse within the same fund or by transferring the recipient’s entitlement to another superannuation fund of their choice. It’s important to note that the split does not result in immediate cash but preserves the superannuation within the system until the non-member spouse reaches the required preservation age. In short it can only be accessed when you become eligible to access superannuation under the relevant superannuation laws.
- Tax Implications and Legal Advice
Superannuation splitting has tax implications. The receiving spouse will not pay tax when the split occurs, but they may be taxed when they eventually access the superannuation, depending on their age and the fund’s rules. Due to the complexity of superannuation laws, it is advisable to seek legal and financial advice to ensure compliance and to achieve a fair outcome.
- Conclusion
Superannuation splitting allows separating couples to achieve a fair division of assets. It requires accurate valuation, formal agreements or court orders, and compliance with notification and implementation procedures.
Professional legal and financial advice is important so as to navigate this process effectively.
If you would like to discuss this with one of our specialist lawyer please call us on 08 8344 6422.