Written by Carolyn Devries - New Way Lawyers 

When a couple separates or divorces in Australia, a key part of the process involves dividing assets, which includes more than just real estate, savings, or possessions. One of the often overlooked but significant assets is superannuation, commonly referred to as "super."

But what does it mean when super is considered in a family law property settlement, and how does it work? Here's a breakdown of this important topic.

What is Superannuation?

Superannuation is essentially a retirement savings fund mandated by Australian law. Employers contribute a percentage of the employees earnings into their super account, which grows over time through investments. It’s designed to help people support themselves financially in retirement. Sometimes employees make voluntary contributions to superannuation as well.

Super is also classified as an asset under the Family Law Act 1975, meaning it must be accounted for during property settlements when a marriage or de facto relationship ends.

How Super is Treated in a Property Settlement

In a property settlement, the division of assets is not simply a 50-50 split. The court or the separating parties take into account several factors, including financial contributions, non-financial contributions, and the future needs of both parties. Superannuation is treated as a form of property, and it can be split between partners, just like any other asset, even if the funds cannot be accessed until retirement age.

Steps Involved in Super Splitting

1. Disclosure of Super Balances: Both parties are required to fully disclose their superannuation balances. This includes self-managed super funds (SMSFs), or any other form of superannuation.

2. Valuation: Superannuation interests may need to be valued, as different types of superannuation accounts can have varying complexities in how their value is calculated. Defined benefit schemes, for instance, might have a different valuation process compared to a regular accumulation fund.

3. Agreement or Court Order: Super can be split through an agreement between both parties, which is then formalised by way of consent orders or a Binding Financial Agreement,  or a court order. A court order is usually sought if an agreement cannot be reached.

4. Super Splitting Methods:

• Base Amount Split: A specified dollar amount is transferred from one party’s super to the other.

• Percentage Split: A percentage of the super balance is transferred. This is common in accumulation funds where the value changes over time.

5. Effect on Super Accounts: Once a super split is finalized, it doesn’t mean that the recipient can immediately access the super funds. The split amount is transferred to the receiving party’s superannuation account and remains preserved until they reach the required age or meet a condition of release, such as retirement.

Why Super is Important in a Property Settlement

Superannuation can represent a significant portion of a couple’s combined wealth, especially for individuals who have worked for many years or have large employer contributions. For older couples, superannuation might be a substantial retirement nest egg, and dividing it ensures that both parties have a fair share to support their future, post-separation.

Furthermore, if there is a significant discrepancy between the super balances of the two parties — for example, one person may have been a primary breadwinner while the other took on a stay-at-home parent role — a super split can help provide fairness and financial security to the party with less super.

Seeking Legal and Financial Advice

Given the complexities surrounding superannuation in a property settlement, it’s essential to seek legal advice to understand your rights and options. Additionally, it may be necessary to get financial advice on the most effective way to handle super splitting, particularly if you have a self-managed super fund or complex superannuation assets.

Conclusion

Superannuation is an important asset in Australia, and its inclusion in family law property settlements ensures that both parties receive a fair distribution of their financial resources. By understanding how super is treated and how it can be split during a settlement, separating couples can work toward a fairer division of their shared wealth. Whether through an agreement or court order, super splitting offers a vital mechanism to ensure financial stability for both parties post-divorce or separation.