When it comes time to retire, women tend to retire with less superannuation than men. Recent research shows that for women aged between 60 to 64, the median value of superannuation is $158,806 and $211,996 for men of the same age. That’s a difference of about 25%. (1)
There are many reasons for the difference in superannuation values, including:
- Women taking more time away from paid work to care for families;
- Women being more likely to work part time and casual roles;
- The gender pay gap;
However, another often overlooked reason is separation and divorce. In many cases superannuation is the second largest asset that couples have, after the family home. With the existing differences in superannuation between men and women, if superannuation is forgotten or ignored as party of property settlement , it can have a significant impact on the long-term financial security of the parties.
Superannuation interests in the context of family law can be complex, so it is always best to get legal advice specific to the circumstances, however following are some helpful tips to consider if you are separating and there are superannuation interests.
1. Superannuation is considered property for the purposes of property / financial settlement.
Under the Family Law Act 1975, superannuation is considered property, despite the fact it can’t be accessed until retirement. This means it is considered part of the asset pool available to be divided between separating or divorcing partners.
2. Superannuation can be valued for the purposes of family law property settlement
Like other property included in the asset pool for the purposes of property settlement, superannuation interests must be assigned a value, and the value may be different from the value that appears on the current superannuation statement.
Superannuation is typically valued using information obtained via a Form 6 Declaration and a Superannuation Information Form, submitted to the superannuation fund. Different rules may apply to defined benefit schemes, and these may be more difficult to value and split.
Superannuation is typically valued using information obtained via a Form 6 Declaration and a Superannuation Information Form, submitted to the superannuation fund. Different rules may apply to defined benefit schemes, and these may be more difficult to value and split.
3. Superannuation can be split between the parties as part of family law property settlement, but it isn’t automatic
There are usually a range of possibilities for structuring entitlements to property settlement, which include
- Splitting superannuation: Superannuation may be divided between the two parties, not necessarily equally, to bring about an overall fair division of assets and property.
- Offsetting superannuation: One party keeps their superannuation, while the other is compensated by receiving a greater share of another asset (e.g., equity in the family home).
- Superannuation is untouched: Sometimes, both parties keep their existing super without change. This arrangement usually occurs when the superannuation amounts are relatively equal, or where both parties agree to do this.
The best approach depends on the individual circumstances of the situation and legal advice should be obtained.
4. Superannuation splitting needs to occur within the framework of fund-specific rules
When a superannuation split is to occur, it needs to occur within the context of the existing superannuation fund rules – these rules can vary from fund to fund. In some cases, funds may have conditions that affect how and when a super split can be implemented. It’s also a good idea to seek advice from either a financial advisor or the fund itself about how best to protect your super.
5. Superannuation splitting needs to occur pursuant to Consent Orders or a Binding Financial Agreement
When property settlement is to include a superannuation split a Binding Financial Agreement or Consent Order will be required. The superannuation fund will need to consent to the terms included in the Agreement or the Consent Orders, in advance of the parties signing the documents. This process is called providing the superannuation fund with procedural fairness. Once the superannuation fund has a completed Binding Financial Agreement or Consent orders it can then implement the terms of the superannuation split.
6. A person receiving a split of superannuation usually won’t get the funds straight away
When superannuation can be split as party of property settlement, the person benefiting from the split can’t access the funds straight away as cash. The split of superannuation is subject to conditions of release set by the fund and a condition of release must be met to access the funds (for example retirement or special hardship).
7. There are ways to protect a party from withdrawing superannuation
When separation occurs later in life and one party is eligible to access their superannuation, there are protective measures that can be taken by the other party to ensure that superannuation is not unilaterally withdrawn and spent until property settlement is completed. An application can be made to the Court for a superannuation flagging order to prevent a party from withdrawing super funds to the detriment of the other party.
If you have separated and have questions about superannuation and family law property settlement you can ask your questions for free at New Way Lawyers Lunch with a Lawyer Facebook group. Lunch with a Lawyer | Facebook
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About Author
Carolyn Devries is the founder of New Way Lawyers, specialising in family law. Carolyn has also founded a Facebook group called Lunch with A Lawyer where people can ask their family law questions for free. She has also released a 7-part podcast called Pathways Through the System which explains the family court legal system.
References
1 The Association of Superannuation Funds of Australia, ASFA Research: An update on superannuation account balances, November 2023
