Superannuation Splitting

Superannuation splitting is dealt with as part of your property, whether the superannuation interests are held in a retail or industry super fund account or a self-managed superannuation fund (SMSF).

Superannuation splitting can be done through a Court Order, Consent Order or a Binding Financial Agreement.

Once the division of superannuation is agreed upon or ordered by the court, the superannuation fund trustee is notified to implement the split, which is known as procedural fairness. The process of a superannuation split in family law is as follows:

Step 1: Disclosure and Valuation of Superannuation

The most common type of superannuation fund is an accumulation fund, which means that the balance shown in the annual superannuation statement is generally accepted as its value. However, a defined benefit or public sector fund can be more complex to assess and may require an actuarial valuation.

Step 2: Agreement or Court Order

Once the values are known, you and your former partner must negotiate how all superannuation will be divided. This can be done by mutual agreement, formalised in Consent Orders or a Financial Agreement, or by a Court Order as part of court proceedings.

Step 3: Implementing the Superannuation Split

Before the superannuation split can be implemented, you must write to the superannuation fund to afford procedural fairness. Procedural fairness is obtained by writing to the relevant super fund and outlining the proposed superannuation splitting orders or provisions that are being proposed. The superannuation fund will then respond in writing to confirm that they have no objection to the superannuation split taking place.

Once you receive a stamped Court Order, or a you complete your Binding Financial Agreement, then you must send a certified copy of the Court Order or executed Financial Agreement. The superannuation Fund will then fund will then transfer the allocated amount into the other person's super account in accordance with your agreement.

Gathering Information

The first step is to gather information about the superannuation interests of you and your former partner. If you are unaware of the details of your former partner's superannuation fund, you can request this information through the Court as part of court proceedings. By submitting a Superannuation Information Request form, the Court can obtain super fund details directly from the Australian Taxation Office (ATO). This ensures transparency in the property settlement and reduces the chance of undisclosed superannuation interests being hidden.

Self-managed Superannaution

Splitting superannuation can be complex when you or your former partner hold super in a self-managed super fund because they are controlled by the member(s), who also act as trustees, meaning they have direct control over the fund’s investment decisions and compliance obligations. Some of the key challenges include obtaining an accurate valuation of the assets held by the SMSF, making sure that the SMSF is complaint with superannuation laws, operating the SMSF as a separated couple without a cooperative relationship, and working out whether assets need to be sold for the superannuation split to occur or if assets are to be rolled over to the other party’s new fund.

The assets of a self-managed super fund may include cash, listed shares, real estate, unlisted shares, collectables or private company investments. Therefore, professional and current valuations are critical to ensure a fair division.

You should also consider the tax consequences involved in the superannuation split, in particular capital gains tax (CGT) if assets are sold or transferred. You and your former partner should get advice from an accountant or financial adviser early in the process.

Defined Benefit and Other Superannuation

Not all superannuation interests can be divided in a property settlement. For example, superannuation interests of $10,000 or less cannot be split, or where there no lump sum to split or transfer, but instead only an income stream, such as some veteran and military pensions, some public sector defined benefit schemes or disability pensions paid as compensation. In these cases, the superannuation is likely to be treated as a financial resource rather than property as part of your property settlement.

You should pay particular attention to public sector schemes, military schemes, and any defined benefit scheme where entitlements are based on salary and service without a fixed account balance. Some include non-commutable pensions and may be non-splittable.

Astor Family Law has extensive experience in advising clients on superannuation splitting as part of separation and divorce.