How is Superannuation dealt with in a Family Law property division?

Is Superannuation included as 'property' in a Family Law property division?

After separation, it is generally necessary for property entitlements to be formally adjusted between the parties in accordance with each party’s entitlements under the Family Law Act 1975. Sometimes it may be appropriate to divide the matrimonial property pool on a 50/50 basis between the parties. Other times, unequal proportions (where one party gets more than the other) might be fair in the circumstances. 

All the property of the parties is required to be included in the matrimonial property pool available for division between the parties. This includes each of the party’s superannuation entitlements, which may form a large part of the property pool. 

What is a 'super split' and how does it work?

As superannuation is held in a trust (prior to the person entitled to the benefits reaching preservation age), superannuation is divided by a different process that other ‘ordinary property. We call the division of superannuation from one party to another in Family Law property division a ‘super split’. 

A super split can only be made where there are court orders or a binding Super Splitting Agreement directing the trustee of the super fund (in accordance with the strict wording required under the legislation) to transfer the specified amount of the super split from the superannuation interest into a new super account. 

For example, there is an order for Part A to make a super split of $40,000 from her superannuation entitlements to Party B. The orders then the effect of reducing Party A’s super entitlements by $40,000 and transferring this amount into Party B’s name. Unless Party B has met a condition of release of their super, the $40,000 must be held in a super account in Party B’s name until they reach a condition of release (such as retirement). Party B can choose to hold this super in an account in their name at the same super fund as Party A, or the can elect to roll over the amount into a super fund of their choice, including adding it to their existing super entitlements. I usually takes about two weeks for the superannuation split to actually be transferred from the payer’s account to the receiving party’s account. 

Self-Managed Super Funds

Self-managed super funds are treated differently than industry super funds and the very strict requirements of a super split can seem artificial as it is common for the members of the self managed super fund to also be the trustees. 

When deciding how to split a self-managed super fund, the value of the fund must first be determined. Unlike industry super funds, self-managed super funds are required to be formally valued as there is no prescribed method to calculate each member’s benefits. It is also common for a self-managed super fund to own a range of assets, including real property, shares and cash, making the super fund potentially more difficult to value and to liquidate, if necessary. If the members of the self-managed super fund cannot agree to the value of the assets of the fund, it may necessary to have the assets of the trust valued independently. 

When implementing a super split in respect of a self managed super fund, serious consideration must be given to the type of asset a party is to receive. Parties may choose to split the assets held by the self managed super fund or they may need to liquidate some or all of the assets in order to implement the super split. 

It must be noted that the sale of assets of a self-managed super fund may give rise to capital gains tax or other tax liabilities. 

Superannuation is a complex component of your Family Law property division. You should consult the advice of a Family Lawyer, accountant and financial advisor in order to ensure that you are protected. 

How Can We Help?

If you need assistance during a separation or want to know more about the impact your superannuation can have on Family Law proceedings, please contact us today on 02 4952 3901 or email hello@delaneyroberts.com.au for a 15 minute free consultation with one of our estate planning solicitors.

By Clare McAteer

Associate Solicitor