Superannuation Question? This is what people ask.
Question 1. Is a Superannuation split mandatory in a divorce or separation?
No, a superannuation split is not mandatory. This is a really common superannuation question. Under Australian law, superannuation is treated as a divisible asset, just like a house, car, or bank account. This means it can be included in the total pool of assets and liabilities to be divided, but it does not have to be.
Separating couples have three main options for dealing with superannuation:
Superannuation Split: They can agree to split the superannuation interest as part of a formal property settlement.
Offset Against Other Assets: They can choose to leave the superannuation untouched and offset its value against other assets. For example, one party may keep their entire super balance in exchange for the other party receiving a larger share of the family home or other assets.
Leave It Untouched: In some cases, particularly in short relationships or where both parties have minimal superannuation, they may agree to leave their respective superannuation funds as they are.
Question 2. How is superannuation split?
Superannuation is split either through a formal agreement or by a court order. The process typically involves these steps: This is a really common superannuation question.
Requesting Information: The first step is to obtain an official valuation of both parties’ superannuation interests. Information is requested by submitting a specific form (Form 6 Declaration) to the superannuation fund trustee.
Valuation: Once the information is received, the interests are valued. The method of valuation depends on the type of fund (see Question 4).
Drafting the Order: The separating couple, usually with the help of a family lawyer, drafts a formal agreement, known as a Binding Financial Agreement (BFA) or Consent Orders.
Obtaining the Order: For a Consent Order, the document is submitted to the Federal Circuit and Family Court of Australia for approval. For a BFA, both parties must have independent legal advice for it to be legally binding.
Implementation: Once the formal order is approved or signed, a certified copy is served on the superannuation fund trustee, who is then legally obligated to implement the split.
Question 3. Can I access the money from a super split immediately?
No. This is one of the most common misconceptions. Splitting superannuation does not convert the money into an immediate cash asset. The money transferred remains subject to superannuation preservation laws.
The funds are rolled over into a new superannuation account in the name of the non-member spouse, but they cannot be accessed until a “condition of release” is met. For most people, this means reaching their preservation age (between 55 and 60, depending on their date of birth) and retiring.
Question 4. How is superannuation valued, and what is the difference between an accumulation fund and a defined benefit fund?
The valuation process differs significantly depending on the type of fund, and it is generally a very good question.
Accumulation Fund: This is the most common type of superannuation fund. The value is simply the account balance as shown on a recent statement.
Defined Benefit Fund: These funds are more complex and are often associated with public sector or older corporate schemes. The value is not the account balance on a statement. Instead, it is a complex actuarial calculation based on factors such as the member’s age, salary, and length of service. An expert actuary must be engaged to perform this valuation, which can be a time-consuming and costly process.
Question 5. What is a “base amount” and a “payment split”?
These are technical terms from the superannuation splitting legislation:
Base Amount: This refers to a specific dollar figure specified in the Consent Order or Binding Financial Agreement to which the non-member spouse is entitled. For example, a court order might specify a base amount of $100,000 to be transferred to the non-member spouse.
Payment Split: This refers to the mechanism by which superannuation is divided. Instead of a lump sum being transferred immediately, a “payment split” operates so that whenever a payment is made from the member’s fund (e.g., when they retire), a portion of that payment is made to the non-member spouse.
Most funds today implement an “interest split,” which allows for a clean break by transferring a specific amount to the non-member spouse’s account as soon as the order is finalised.
