Lose superannuation

Can I Lose my Superannuation in the Property Settlement?

  |   Family Law

In family law matters, property settlements can be full of difficult issues. There’s real estate to consider, and division of personal items, cars and bank accounts. In the case of superannuation, many believe it is separate from the pool of property, perhaps because it is the product of an individual’s work efforts.


However, this is not the case.


Superannuation must be considered in property settlement


Under the Family Law Act, an individual’s superannuation is considered to be part of the property of the marriage. Because the purpose of a property settlement is to finalise all financial matters between the parties, all superannuation accounts belonging to either party must be considered.


The rationale is that while one party may have been able to accumulate a significant amount of superannuation during their working life, the other party may have taken leave from work to care for children, or may not be able to work full-time due to family responsibilities, or may have had to accept a lower paid position after taking time out for family.


The point is that both parties have made significant contributions to the family unit, but in different ways. The Family Law Act recognises this and allows superannuation to form part of property settlements in an attempt to put both parties on an even level.


In theory, then, it is possible to lose your superannuation in a property settlement. But the reality is perhaps not quite as confronting.


The mechanics of property settlements


Arriving at a property settlement is a complex process, with a number of factors under consideration, including:


  • Identification and valuation of current assets.
  • Assets that the parties had prior to the marriage.
  • Debts and other liabilities.
  • Future needs of the parties.
  • Earning abilities of the parties.


The family court will consider all of these issues (and more) when trying to determine how to divide property. It is a very detailed process and is often time consuming. One of the issues that makes the property division even more difficult is the question of superannuation, as the court must try to determine the worth of the fund when it matures, and balance this against the present competing interests of the parties.


One of the ways the parties may seek to assist themselves and the court is through an agreement known as superannuation splitting.


Superannuation splitting


Superannuation splitting allows the parties to agree to the superannuation fund being split between them when the benefit becomes payable. It will not necessarily be an even 50/50 split – the split will be determined by the circumstances of the parties and the manner in which other property is allocated. For example, one party may settle for a 30% share of the superannuation, but seek to offset this by taking a much higher percentage of the real estate belonging to the parties.


It is important to note that any agreement to split the superannuation does not impact when the superannuation becomes available. The funds would normally be released to the parties only upon the fund holder retiring from the workforce.


The process for splitting superannuation includes a valuation and court order (there are also some circumstances in which splitting is prohibited). Then the parties must apply to the family court for an order that will direct the superannuation fund to make payment to the parties according to the agreement, only when the benefit becomes payable. If the parties have agreed, this may be a consent order. If the parties cannot agree, one or both parties will have to apply to the court to determine the matter.


De facto relationships


Parties who have lived in a de facto relationship may also seek a property settlement under the Family Law Act, including superannuation splitting. However, the parties must have been in a de facto relationship for at least two years and satisfy the Family Law Act’s definition of a de facto relationship.


Note that for all other superannuation matters concerning de facto relationships, the relationship must have existed for at least three years.


Changing the court’s orders


Once the family court has made orders for a superannuation splitting arrangement, that is usually the end of the matter. However, there are some rare circumstances in which the court’s orders can be varied or set aside. These include a miscarriage of justice because of fraud, duress or failure to disclose relevant information, or that there are new and exceptional circumstances relating to the care of a child of the parties.


Great care should be exercised when seeking an order from the court. Legal advice is strongly recommended for property settlements, especially if there is a possibility of superannuation splitting.