For many couples separating in Brisbane, superannuation is one of their most significant financial assets. In some cases, it may even be worth more than the equity in the family home. Despite this, superannuation is often one of the least understood aspects of a property settlement.
Understanding how superannuation is treated after separation can help you make informed decisions about your financial future.
At KLM Solicitors, we assist clients navigating family law property settlements in Brisbane, including matters involving superannuation. This guide explains how superannuation splitting works, what needs to be considered and the steps involved in reaching a legally binding arrangement.
Is Superannuation Included in a Property Settlement?
Under the Family Law Act 1975, superannuation is treated as property for the purposes of a family law property settlement. This applies to both married and de facto couples.
However, superannuation is different from other assets, such as a family home, savings or investments.
Superannuation is held within a fund, managed by a trustee and subject to specific laws governing when and how it can be accessed. In most circumstances, it cannot be withdrawn until a person meets a condition of release, such as retirement.
These differences are important when considering how superannuation should be divided and what a fair and practical settlement might look like.
What Does Splitting Superannuation Actually Mean?
A superannuation split allows part of one person's superannuation entitlement to be allocated to their former partner as part of a property settlement.
The person whose superannuation is being split is known as the member spouse, while the person receiving a share is referred to as the non-member spouse.
A superannuation split can generally be expressed as either:
A fixed dollar amount: A specified amount, known as a base amount, is allocated from one person's superannuation interest.
A percentage: A specified percentage of the relevant superannuation interest is allocated to the other person.
Importantly, splitting superannuation does not mean the receiving person can immediately access the funds as cash.
The amount generally remains within the superannuation system and is subject to the usual rules about when benefits can be accessed.
Depending on the type of superannuation interest and the fund's requirements, the receiving person may be able to retain their entitlement within the existing fund or transfer it to another eligible superannuation fund.
Why Does the Type of Superannuation Matter?
Not all superannuation interests are the same. Before deciding how superannuation should be dealt with in a property settlement, it is important to identify the type of interest involved and establish its value.
Accumulation Superannuation Funds
Accumulation funds are the most common type of superannuation in Australia.
The value of an accumulation account is generally based on the balance held in the fund, including contributions and investment earnings.
A recent statement can provide a useful starting point, although updated information may be required when preparing a settlement.
Defined Benefit Superannuation Funds
Defined benefit funds operate differently. Rather than relying solely on an account balance, benefits are generally calculated using a formula that may take into account salary, years of service and other factors.
Some current and former Queensland public sector employees hold defined benefit interests.
These interests can be more complex to value and may require specialist calculations or expert advice.
Self-Managed Superannuation Funds
Self-managed superannuation funds (SMSFs) can present additional considerations, particularly where the separating couple are also trustees of the fund.
An SMSF may hold assets such as property, shares or cash, and an accurate valuation of those assets may be required.
Professional accounting and financial advice may be necessary to ensure any proposed split is appropriate and can be implemented in accordance with the fund's obligations.
Multiple or Forgotten Superannuation Accounts
It is not uncommon for people to have accumulated several superannuation accounts throughout their working lives.
Identifying all relevant accounts is an important part of understanding the overall asset pool and ensuring superannuation is properly considered during settlement negotiations.
Is Superannuation Worth the Same as Other Assets?
Although superannuation forms part of the property settlement process, its practical value can be different from money held in a bank account or equity in a home.
For example, one person may wish to retain a greater share of the family home in exchange for receiving less superannuation.
While this may provide greater financial flexibility in the short term, it could also affect their retirement savings.
When considering an arrangement of this kind, relevant factors may include:
Each person's age and stage of life.
Their current and future financial circumstances.
Housing needs following separation.
The value and accessibility of other assets.
Their existing superannuation balances and retirement needs.
There is no automatic requirement that superannuation be divided equally. How it is treated depends on the circumstances of the overall property settlement.
Obtaining independent financial advice alongside family law advice can help you understand the longer-term implications of any proposed arrangement.
How Is Superannuation Split After Separation?
While every property settlement is different, the process of splitting superannuation generally involves several important steps.
1. Identify All Superannuation Accounts
The first step is to establish what superannuation interests exist.
You can access information about superannuation accounts held in your own name through your myGov account linked to the Australian Taxation Office (ATO).
Where information about a former partner's superannuation is unavailable, there are processes for obtaining relevant information, including through the Federal Circuit and Family Court of Australia in eligible proceedings.
2. Request Information From the Superannuation Fund
Once the relevant accounts have been identified, information may need to be requested directly from the fund's trustee.
This commonly involves completing a Superannuation Information Request Form and the required Form 6 Declaration.
The information provided can help establish the nature and value of the superannuation interest and identify any requirements that may affect a proposed split.
Some funds charge a fee for providing this information.
3. Establish the Value of the Superannuation
The valuation process depends on the type of superannuation interest involved.
For a standard accumulation account, information supplied by the fund may be sufficient.
More complex interests, including certain defined benefit funds and self-managed superannuation funds, may require specialist valuation advice.
Accurate information is important because an incorrect valuation can affect the overall settlement.
4. Consider the Available Settlement Options
Once the superannuation interests have been identified and valued, the parties can consider how they should be addressed.
Depending on the circumstances, this may involve:
Splitting one or more superannuation interests.
Leaving superannuation unchanged while adjusting the division of other assets.
Seeking a flagging arrangement in appropriate circumstances to prevent certain superannuation benefits from being paid while the matter remains unresolved.
The appropriate approach will depend on the overall asset pool, each person's circumstances and the proposed settlement.
5. Notify the Superannuation Fund
Before proposed superannuation splitting or flagging orders are made, the trustee generally needs to be given procedural fairness.
This means providing the trustee with the proposed orders and an opportunity to raise concerns about whether they can be implemented.
This is an important step, as different funds may have specific requirements that need to be addressed in the drafting.
6. Formalise and Implement the Agreement
A superannuation split can be formalised through court orders, including consent orders, or through a complying superannuation agreement.
Where consent orders are sought, the court must approve the proposed settlement.
Once the relevant documents have been finalised, they must be provided to the superannuation trustee so the split can be implemented.
It is also important to confirm that the fund has processed the arrangement correctly.
Errors in the drafting or implementation of superannuation arrangements can lead to delays and additional costs.
For further information, the Federal Circuit and Family Court of Australia provides guidance on family law and superannuation.
You can also read our article on consent orders or learn more about binding financial agreements.
Getting Legal Advice About Superannuation and Property Settlement
Superannuation can have a significant impact on your financial future following separation. Understanding what you may be entitled to, what you are agreeing to give up and when funds can be accessed is an important part of making informed decisions.
It is also important to be aware that time limits can apply to property settlement applications, including those involving superannuation.
At KLM Solicitors, our Brisbane family law team assists clients with property settlements involving superannuation, helping them understand their options and work towards practical, legally sound arrangements.
Whether you are beginning the separation process or considering a proposed settlement, obtaining legal advice early can help you approach the next steps with greater clarity and confidence.