What is superannuation splitting in Family Law?

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Superannuation or retirement funds that a couple holds are subject to division if a couple is divorcing or a de facto couple is separating permanently. However, these funds must be handled and distributed differently than other forms of jointly owned property and assets. This is because there are additional laws and regulations that govern superannuation, including tax laws. For example, superannuation funds cannot simply be converted to cash or a liquid asset as there may be tax implications for taking such action.

First it is important to understand that anything relating to superannuation and asset division amongst couples that are separating, can be agreed upon by the parties involved via a settlement agreement. For example, if one spouse or partner wants to retain the family home and is willing to forgo the same value in superannuation funds to do so, the other person can agree to this proposal and term.  Therefore, flexibility in division of superannuation funds is possible.

More often than not superannuation funds are handled in a manner that is separate from the division of other more ordinary assets. The reason for this is three-fold; 1) superannuation can be contained in different accounts, both jointly and separately held; 2) superannuation funds need to be valued prior to being disbursed to each party and 3) the trustee of the superannuation funds needs to be involved and participate in the proper division and distribution of the monies.

In addition, if the parties cannot come to an agreement as to how to divide their superannuation funds, the Court will need to get involved. When this happens, the Court will ask the parties to prepare and accounting of all of the superannuation funds held. The accounting will most likely be completed by an independent party.

Next the Court will take many of the following variables into consideration;

  • How long the couple was together
  • If the accounts were held jointly or separately
  • Did the accounts exist prior to the union
  • The current employment of each party
  • The age and timing of retirement for each party
  • Children of the union
  • Ongoing financial commitments of each party

The timing of requesting the distribution of superannuation is important and should be in the forefront of the party’s minds. If the couple has not yet officially received a divorce order, then a request for the accounting and division of superannuation funds can occur anytime after the couple has separated. However, if the couple has received their official Order of Divorce, then a claim for the accounting and distribution of superannuation assets must occur within 12 months of the issuance of the Order.

The timing is slightly different for de facto couples. In this circumstance, a request for the division and distribution of superannuation must be made within two years of the couple separating.

In either circumstance, if the parties do not make the request within the allotted time frame, the request can still be made, however the ensuing process will be more difficult as the party making the request will have to show hardship. This can be an expensive and difficult process. Hence, if either party is considering making a request for superannuation assets, it is best to do so within the legal time frame allotted.

It is important to keep in mind that all superannuation fund agreements should be codified. Even if you have come to the agreement on your own, it is necessary for both parties to have done so with the assistance of separate attorneys and a full understanding of their rights.

While the agreement does not have to be filed with the Court, it is always wise to do so. This can be accomplished by requesting a Consent Order from the Court. If the parties choose to they can instead record their agreement in a Binding Financial Agreement. This agreement does not need to be filed with the Court but both parties do have to show that they entered into the agreement with the advice of counsel and full understanding of the rights and liabilities of the terms.

Regardless of the avenue a couple decides to take when valuating and distributing their superannuation, it is imperative that legal, financial and tax advice be sought from attorneys, financial planners and accountants. By doing so the parties can ensure that the necessary legal requirements are met, the value of the assets is properly calculated and the future of both parties is secure.

If you find yourself in need of assistance with this, or any other legal issue, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.

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