The Family Law Act 1975 governs the division of superannuation in Australia during a divorce or separation. Under this law, superannuation is treated as a type of property, and its division is managed within the same framework used for other assets, like real estate or bank accounts. This means that, in the event of a marriage or de facto relationship breakdown, superannuation can be included in the property settlement process.
The Family Law Act allows for superannuation to be divided through a “superannuation splitting order,” making it possible to transfer a portion of one spouse’s superannuation to the other as part of an equitable property settlement. Dividing superannuation fairly ensures that both parties have financial security and stability moving forward.
Impact on Retirement
Splitting superannuation during a divorce can affect each party’s retirement plans. A reduction in superannuation savings may mean that both individuals need to reassess their retirement goals and financial stability in the long term. For some, dividing super may necessitate building additional retirement savings, adjusting financial plans, or considering other investment options.
Is Super Split 50/50 in a Divorce?
One of the most common misconceptions about superannuation in divorce is that it’s automatically split 50/50 between both parties. Superannuation does not have a default equal division. Each case is assessed individually, and the outcome depends on a range of factors, rather than a simple split down the middle. The last step in the property settlement process is justice and equity. This may lead to a split other than 50/50, depending on the circumstances of each separated couple.
Factors Considered in Division
When determining how superannuation will be divided, the court considers various aspects. These can include the duration of the marriage, financial contributions each party made to the marriage, and any non-financial contributions, parenting and homemaking. Additional factors include the future needs such as age, health, and future earning capacity of each party, primary care of children under 18 years, as well as their relevant individual needs moving forward. The goal is to ensure that a just and equitable outcome, taking into account the entirety of their circumstances, rather than strictly following a formulaic split.
Super Division Example Scenarios
Scenario 1: Sarah and Tom were married for 25 years. Throughout their marriage, Sarah stayed home to raise their children, while Tom was the primary breadwinner and contributed significantly to his superannuation. Given Sarah’s limited superannuation balance and her reduced earning capacity due to years outside the workforce, the court may award her a share of Tom’s superannuation to balance her future financial security.
Scenario 2: Emma and Jack were married for three years, with both contributing equally to their super funds and each having an equal amount of super. They have no children, and both have similar incomes and future earning potential. In this situation, Emma and Jack may retain the entirety of their respective superannuation balances as part of settlement which may be part of achieving a just and equitable outcome.
Scenario 3: Claire and Matt were married for 10 years. Matt accumulated most of his superannuation before the marriage, while Claire’s superannuation contributions primarily occurred during the relationship. The court may consider a division that acknowledges Matt’s pre-marriage contributions and in effect focuses only on superannuation accumulated during their time together.
Legal Framework
Superannuation Splitting Order
A superannuation splitting order is a court order that directs the division of a portion of the superannuation balance held by a superannuation fund from one spouse to the other. Either spouse can apply for this order, and it forms part of the overall property settlement process. The split goes from “super to super”, not from “super to cash” unless superannuation release requirements are met for example.
To obtain a superannuation splitting order, the value of the superannuation fund must be assessed, which often requires information from the superannuation fund itself. Once a value is determined, the court can issue an order specifying the amount or percentage of superannuation to be transferred to the other spouse’s superannuation fund. It’s worth noting again that the superannuation remains in the fund until retirement age or until eligible release, as it cannot be accessed immediately.
Consent Orders
In some cases, couples are able to reach an agreement on how to split their superannuation without requiring lengthy court proceedings. If both parties agree on the terms of the superannuation division, they can apply for consent orders, which are legally binding agreements approved by the court.
Consent orders allow couples to avoid the formal court process, offering a more straightforward and less costly approach. To apply for consent orders, couples must submit their agreement to the court for review, along with evidence that the agreement is fair and equitable. Once approved, the consent orders become legally enforceable, and the superannuation fund is directed to split the super as agreed.
Another option to record an agreement which includes superannuation splitting is to record it in a Binding Financial Agreement. Both parties need independent legal advice and there are strict legal requirements that must be met for such agreements.
Steps to Take When Dividing Superannuation
Valuing Superannuation
The valuation process can vary depending on the type of superannuation fund, such as accumulation funds, defined benefit schemes, or self-managed super funds. Each type of fund has different rules and methods for determining its value. For example, accumulation funds are typically valued based on their current balance, whereas defined benefit schemes may require actuarial assessments due to their complexity. Engaging the superannuation fund to obtain a valuation can help both parties understand the true worth of this asset, forming a strong foundation for equitable negotiations or court orders.
Seeking Financial Advice
Dividing superannuation can have long-term financial impacts. Consulting with financial advisors or superannuation specialists can provide valuable insights into these implications, helping each party make informed decisions. A specialist can advise on tax consequences, potential impacts on retirement plans, and ways to adjust financial strategies post-division.
Legal Representation
Involving a family lawyer is important when dividing superannuation, especially if complex issues or disputes arise. A family lawyer experienced in superannuation matters can guide you through the legal requirements, ensuring compliance with the The Family Law Act 1975 and protecting your interests. Lawyers play a key role in drafting and/or filing necessary documents, obtaining consent orders or drafting a Binding Financial Agreement as an example, or applying for superannuation splitting orders.
How Daykin Family Law Can Help
With years of experience in family law, Daykin Family Law is here to guide you through the process with clarity and compassion, ensuring you feel supported and informed every step of the way. We take the time to explain your options and work with you to find the best solution for your unique situation. If you’re looking for advice on superannuation division, reach out to our team today.
