Navigating Superannuation Splits: A Guide under the Family Law Act

 Introduction:

Divorce or separation is a challenging time for individuals and families. As couples untangle their lives, the division of assets is a crucial aspect of the process. Superannuation, is often a significant financial asset, and subject to specific regulations under the Family Law Act (“the Act”). Below we will shed light on how the Act addresses this crucial aspect of property settlement.

Understanding Superannuation Splits:

Superannuation is money set aside during a person's working life to provide them with income in retirement and accumulated in a fund subject to specific laws. When a couple separate or divorce the superannuation is considered part of the asset pool which is to be divided and recognised under the Act as a divisible asset.  The Act provides a framework for its fair distribution between the parties involved.

Superannuation splits do not convert superannuation into a cash asset – it is still subject to superannuation laws. 

Key things to consider:

• Eligibility for Superannuation Split: Not all couples may be eligible for a superannuation split. The parties involved must be either married or in a de facto relationship. Additionally, they need to finalise their property settlement and, in most cases, obtain a court order or a formal agreement outlining the terms of the split.

• Valuation of Superannuation Interests: Accurately valuing superannuation interests is crucial in determining a fair and equitable split. The valuation process involves obtaining information from the relevant superannuation fund, and it may consider factors such as the account balance, contributions made during the relationship, and potential tax implications. Different types of funds may require different types of methods to properly ascertain the value and on occasion an expert may need to be appointed.
• Methods of Superannuation division: The Act provides various methods for the division of superannuation entitlements, including the creation of a separate interest, flagging an interest, or a combination of both. Creating a separate interest involves “splitting” the superannuation into two separate accounts, allowing each party to have their own fund. Flagging, on the other hand, delays the actual split until a “triggering event” occurs, such as the retirement or death of the fund member.
• Laws and Regulations: The specific laws and regulations governing superannuation splits can vary between jurisdictions. It is crucial to consult with legal professionals who specialise in family law to ensure compliance with the relevant legislation and to navigate any unique requirements specific to your location.

Conclusion:

Superannuation splits under the Family Law Act play a crucial role in achieving a fair and just property settlement for separating couples. Understanding the eligibility criteria, valuation methods, and available options is essential for a smooth and equitable division of this significant financial asset. Seeking legal and financial advice is highly beneficial to navigate the complexities of superannuation splits and ensure compliance with applicable laws. By approaching this aspect of property settlement with knowledge and diligence, couples can move forward with confidence and financial security. 

Please contact us if we can be of any assistance or you have any questions on this topic.