Navigating Superannuation Splitting

Family Law: 06 August 2024

Author: Julia Popa - Our People

If you are recently separated, you may be entitled to a portion of your ex-partner's superannuation, or conversely, they might be entitled to a share of yours.

According to the Family Law Act, superannuation entitlements are treated as a form of property that can be divided between ex-partners. Notwithstanding this, it differs from other types of property in the sense that it is held within a trust and its access is governed by stringent laws. Accordingly, its division, or what family lawyers often refer to as “split”, is dictated by separate legal principles.

How is Superannuation “Split”?

In the case of long relationships of at least 10 years, superannuation that accrued during the course of the relationship is often equalised between the parties during the asset division process.

Consider this scenario: if you have superannuation of $50,000 at the time of separation while your ex-partner has $100,000, equalising your respective superannuation entitlements would lead to both of you ending up with $75,000 each in superannuation.

In essence, the trustee of the superannuation fund containing the higher amount will shift a portion of the spouse's superannuation benefits to their ex-partner’s chosen fund. This process is referred to as a superannuation “rollover”.

In the example provided above, the amount of $25,000 of your ex-partner’s superannuation entitlements would be rolled over to your nominated fund.

Will I be able to access the Superannuation following the split?

Splitting superannuation does not transform it into a readily accessible cash asset. Rather, it remains subject to superannuation laws and is transferred to a nominated superannuation account only to be accessed upon retirement or satisfaction of another condition of release.

How do I go about legally dividing my Superannuation?

Superannuation can be divided through an Application for Consent Orders or a Binding Financial Agreement.

The parties’ respective lawyers will ultimately determine which path to go down, depending on the circumstances.

Regardless of the chosen route, the trustee of the superannuation fund comprising the higher amount will ultimately be directed to affect the rollover sought. In these circumstances, the parties must firstly afford procedural fairness to the relevant trustee.

Affording procedural fairness to the trustee involves the provision of notice of the terms of the proposed superannuation splitting order. The notice period must be at least 28 days before any intended superannuation splitting order is to be made.

In essence, a superannuation splitting order will explicitly detail, amongst other things, the amount in which the trustee of the larger superannuation fund must rollover to the other party’s chosen fund. This is amount is termed the “base amount”.

Once the relevant trustee is afforded procedural fairness, the trustee can either approve or reject the proposed orders. If your superannuation splitting orders are meticulously prepared by an experienced family lawyer, it is unlikely that the proposed orders will be rejected by the fund.

Application for Consent Orders

Once the trustee of the relevant fund has been afforded procedural fairness and approved of the superannuation splitting orders sought, the parties can formalise the orders by way of an Application for Consent Orders in the Federal Circuit and Family Court of Australia.

The Application for Consent Orders is sent to the Court directly, and the parties are not required to attend a hearing.

Binding Financial Agreement

A superannuation split can also be formalised by way of a Binding Financial Agreement. Agreements of this type seek to exclude the jurisdiction of the Court and the election of this route as a means to formalise your superannuation split would be heavily considered by your respective lawyers, depending on the circumstances of the asset division as a whole. Both you and your ex-partner must obtain independent legal advice before signing the Binding Financial Agreement, and each of your respective lawyers must affirm in writing that they provided the requisite advice.

If you and your ex-partner do not seek independent legal advice, the superannuation splitting agreement as detailed in the Binding Financial Agreement will not be legally binding on the trustee of the relevant superannuation fund.

Next Steps

The above is a very simple explanation of the superannuation splitting process. Matters can become inherently complex if a self-managed superannuation fund or a defined benefit interest fund is involved. In those circumstances, the above may not necessarily apply.

In any event, superannuation is an important asset that ensures financial security during your retirement years. If you would like some advice or assistance in relation to a superannuation split, please call our office on 03 8600 6000 and speak with one of our highly qualified and experienced family lawyers.