Whether you’re already in the midst of working out a property settlement or you’re just starting to think about separation, you’re probably aware that divorce is a tumultuous journey that has a lot of legal and financial complexities.
Among the myriad of property and assets to be divided is superannuation (retirement funds) and this particular asset can be daunting.
If you’re going through a divorce, understanding superannuation splitting laws and the process of dividing these assets during a divorce can make a significant difference to your financial future.
In this article, we aim to shed light on this intricate aspect of divorce, helping you navigate through the web of laws, procedures, and potential pitfalls with clarity and confidence.
- Understand the Superannuation Splitting Laws and Family Law Act to navigate divorce superannuation.
- Consider financial agreements or court orders for formalising asset division, and be aware of tax implications and superannuation fund rules.
- Seek professional help from divorce lawyers to ensure you’re making informed decisions regarding complexities of divorce superannuation within specified time limits.
Understanding the Superannuation Splitting Laws
Interpreting the superannuation splitting laws may initially seem like solving a complex puzzle, but it is an integral part of any divorce process.
Simply put, these laws allow for the division of superannuation assets during divorce, treating them as property without converting them into cash assets. The superannuation fund trustee plays a critical role in this process, ensuring compliance with these laws and the customary conditions of release.
The process is governed by specific parts of the Family Law Act 1975, which are relevant to family law property proceedings. Thus, understanding these laws provides a crucial foundation for navigating through the superannuation division process.
Despite initial impressions, the process is less intimidating due to the clear framework provided by the laws for dividing superannuation, which upholds procedural fairness. They stipulate that the superannuation fund trustee must adhere to the payment terms of the order, ensuring that the division of superannuation assets is carried out according to the legal requirements. Furthermore, specific regulations delineate the conditions under which interest splitting options are available for Commonwealth regulated funds. Thus, understanding these laws can help mitigate the complexities of the superannuation division process.
Family Law Act 1975
The Family Law Act provides a robust framework for superannuation splitting. It views superannuation as property, albeit a unique breed of property held in trust. The act allows for the consideration of superannuation entitlements as ‘property’ that can be divided between separating parties during a property settlement. This division can be achieved either through a formal financial agreement or via the Court and super-splitting laws.
The inclusion of superannuation in property settlement matters is significant as often it is one of the most valuable assets that a person may have. In some cases, one party to the marriage or de facto relationship may have significantly more superannuation – especially if one party took time off from work to raise children.
Acquiring information about your spouse’s superannuation might feel elusive, somewhat akin to grasping at smoke. Nevertheless, the act offers a clear pathway. Parties involved in current proceedings seeking financial or property orders can apply directly to the court to request the superannuation information using the approved Superannuation Information Request form online via the Commonwealth Courts Portal.
De facto relationships
While marriage may be sealed with a kiss, de facto relationships are often sealed with a handshake. Nonetheless, when it comes to superannuation splitting laws, both marital and de facto relationships are considered equal before the law. Superannuation is deemed an asset and can be divided upon the termination of a marriage or de facto relationship.
However, the path to superannuation orders for de facto couples is lined with stringent prerequisites. The relationship must have spanned a minimum period of two years, unless there is a child or children of the relationship. In such cases, the two-year rule does not apply and an application can be made even if the relationship ended prior to two years. This is an important aspect of family law property proceedings.
The Divorce Superannuation Process
Embarking on the divorce superannuation process can sometimes feel like charting a course through an intricate forest. The first step in this journey is securing valuation information. To do this, it’s necessary to obtain the correct forms, which can be found in the Superannuation Information Kit on the Federal Circuit and Family Court of Australia’s website. Once the valuation information is secured, the next step is deciding on a method of splitting.
Deciding on a method for splitting superannuation might feel like opting between two unfamiliar paths, each leading to an uncertain outcome. Superannuation can be divided either through a financial agreement or a court order. The choice hinges on the circumstances of the divorce and the preferences of the parties involved.
Obtaining valuation information
In a divorce, securing valuation information equates to casting a revealing light on the superannuation assets. This process involves:
- Valuing the assets in the superannuation fund
- Computing the aggregate value of both parties’ superannuation interests
- Completing a Form 6 to acquire the Superannuation Information Form necessary for the preparation of a valuation.
However, the process of valuing superannuation assets can be as intricate as a spider’s web. In complex cases, an external party may need to be enlisted to accurately assess the superannuation interest.
The Court ensures that any division of superannuation assets is equitable and in accordance with the Family Law Act during family law proceedings.
Choosing a method of splitting
Deciding on a method for splitting superannuation assets during a divorce can be likened to a strategic game of chess, where each decision carries significant implications. There are two main methods: a financial agreement or a court order. A financial agreement is a legally binding document that outlines how the superannuation assets will be divided. It requires both parties’ consent and legal advice.
On the other hand, a court order is an official decree issued by the Federal Circuit and Family Court of Australia when couples cannot reach an agreement. It dictates how the superannuation assets will be divided. Whether you choose a financial agreement or a court order, the process requires careful consideration and strategic planning.
Self Managed Super Funds and Divorce
Deciphering the intricacies of self managed super funds (SMSFs) during a divorce might seem like attempting to disentangle a complex knot. These private funds, managed by the parties themselves, present unique challenges during divorce, including the valuation and splitting of assets. In the case of a self managed super fund, this section outlines these complexities and offers some guidance on how to navigate them, especially when dealing with self managed superannuation funds.
To fathom the depth of these challenges, let’s first understand the nature of SMSFs. These funds are administered by the parties themselves, without any external involvement. They may, however, enlist the help of an attorney and/or accountant. They are responsible for investing fund monies. This includes:
- buying property
- other worthwhile assets to grow the value of the fund.
Valuing SMSF assets
Valuing SMSF assets during a divorce may initially seem complex. The superannuation fund trustee, in this case, the SMSF trustees, are responsible for this task, ensuring that the division of superannuation assets is carried out according to the legal requirements.
The valuation of the assets then forms the basis for valuing the members’ balances in the fund. It’s important to note that superannuation savings are considered property or marital assets and are thus included in the asset pool to be divided upon the breakdown of the relationship.
Splitting SMSF assets
Dividing SMSF assets requires the valuation of SMSF assets, including cash, shares, and term deposits. The SMSF trustee furnishes each party with a payment split notice, a formal notification of the division.
However, the process of splitting SMSF assets is not without its complexities. It involves decisions about asset allocation or sale, and potential tax implications. For example, superannuation benefits received by the non-member spouse may be subject to tax, and capital gains tax (CGT) accrued on assets in an SMSF may be forgiven when those assets are used to generate a pension.
Financial Agreements and Court Orders
Financial agreements and court orders provide clear directives for dividing superannuation assets during a divorce. They serve to formalise superannuation splits, providing a legal framework that facilitates the process of asset division.
Financial agreements and court orders are like two sides of the same coin. Both serve the same purpose – to formalise the division of superannuation assets – but they do it in different ways. Financial agreements are contracts agreed upon by both parties, while court orders are issued by the court when the parties cannot reach an agreement.
Binding financial agreements
Binding financial agreements are firm contracts that are legally enforceable as long as they are made following all legal requirements of their creation. To be legally valid, they must meet specific requirements. The superannuation agreement must:
- Be part of a Part VIII A financial agreement
- Both parties must obtain legal advice
- A financial agreement must be drawn up and agreed to by both parties.
At first glance, binding financial agreements may seem like a simple solution. However, they require careful drafting and legal advice. The role of legal advice in finalising a binding financial agreement for superannuation split is to provide guidance and assistance in negotiating and preparing the agreement. A lawyer can offer their expertise to ensure that the agreement meets all legal requirements and protects the interests of both parties involved.
Looking at the other side of the equation, we have court-ordered splits. These orders are issued by the Federal Circuit and Family Court of Australia when couples cannot reach an agreement. The court steps in and determines how the superannuation assets will be divided.
Obtaining a court order for superannuation splitting involves specific steps. These include:
- Gathering information concerning your or your ex-partner’s superannuation
- Obtaining a valuation of the superannuation
- Serving a superannuation information request form to the court
- Notifying the trustee of the superannuation fund about the court order sought
- Pursuing court orders pertaining to the superannuation split.
Tax Implications of Superannuation Splits
Tax implications of superannuation splits can significantly impact the process of asset division. It’s essential to consider these implications carefully to avoid any unpleasant surprises down the line. Among these, the capital gains tax (CGT) and the timing of asset sales to access exemptions are particularly important.
For instance, capital gains tax (CGT) may be applicable when the assets have to be liquidated in order to finance a disbursement from the fund or when there is a complete dissolution. However, the Capital Gains Tax Exemption applies to assets in the retirement phase, and those close to retirement may be eligible to receive its benefits.
What Factors are Considered When Splitting Super in Australia?
In a divorce in Australia, the factors considered for splitting superannuation are similar to those in a property settlement.
These include the length of the marriage, financial and non-financial contributions by both parties, the age and health of each individual, current and future financial circumstances, care and support of children, and any prior agreements regarding superannuation.
This ensures a fair and equitable division of superannuation assets, reflecting each party’s contributions and needs within the context of their overall financial settlement.
How Can Super Actually be Split?
In a divorce in Australia, the split of superannuation isn’t necessarily 50/50. The division depends on the couple’s overall financial circumstances and contributions during the marriage.
It’s possible for one party to retain a larger portion of the superannuation while the other receives more of different assets, balancing the overall division of property.
The decision can be tailored to each party’s needs and future financial security, taking into account factors such as age, health, care of children, and earning capacity.
The portion of superannuation allocated to the non-member spouse must either be transferred into their own superannuation fund or held in the existing fund until they reach the fund’s eligible age for access. This ensures that the superannuation benefits are preserved for retirement, in line with superannuation laws.
The transfer or retention of funds is typically managed through a formal process, ensuring compliance with legal requirements and safeguarding the retirement interests of both parties.
Seeking Professional Help
Dealing with the complexities of divorce and superannuation without professional assistance can be like venturing into unexplored waters. Professional help, such as divorce lawyers can provide guidance, demystify complex processes, and help individuals make informed decisions.
Legal representation can help individuals with:
- Understanding their rights and obligations
- Assisting in negotiations
- Drafting financial agreements and court orders
- Providing guidance on the legal aspects of superannuation splitting, ensuring compliance with family law and superannuation laws
- Obtaining independent legal advice
Having legal representation during a divorce is comparable to having a reliable guide during a challenging expedition. A lawyer can help individuals understand their rights, assist in negotiations, and ensure that the process of dividing superannuation assets is fair and legally compliant. They can also assist in:
- Drafting financial agreements and court orders related to superannuation after divorce
- Engaging in negotiations
- Constructing binding financial agreements
- Submitting applications for Consent Orders
- Adhering to regulations
The role of a family divorce lawyer extends beyond simply providing legal advice. They can assist clients in navigating the complex landscape of superannuation division, offering guidance and support at every stage of the process. They can also provide advice on the implications and consequences of financial agreements and court orders.
Time Limits and Claiming Superannuation
The clock starts ticking from the date of separation, and missing these deadlines can have serious implications. For married couples, the time limit for claiming superannuation after separation is from the date of separation up until one year after the divorce order is finalised. For de facto couples, the time limit is within two years of the date of separation.
Missing these deadlines can be like missing a train – the opportunity to make a claim may be lost. If the time limit for claiming superannuation splits after separation is not observed, it may not be feasible to make a claim for the superannuation assets. However, under certain conditions, the time limit for claiming superannuation after separation may be extended.
Expert Guidance on Superannuation in Divorce Proceedings
At Clarity Lawyers, we understand the critical role that superannuation plays in the context of divorce settlements. Navigating the division of superannuation requires not only legal expertise but also a comprehensive understanding of financial regulations and long-term financial planning.
Our team is equipped with the knowledge and experience necessary to ensure that your superannuation rights are thoroughly considered and fairly represented in the divorce proceedings. We are committed to providing you with clear, strategic advice, helping to secure your financial stability and peace of mind during this transition. Trust in our dedication to deliver outcomes that protect your future, as we guide you through the complexities of superannuation within the divorce process.
You can get in touch with our divorce lawyers by calling us on (02) 4058 4007 or booking a free, no obligation consultation here.
Frequently Asked Questions
Do I get half of my husband’s super in a divorce?
You may be entitled to receive half of your husband’s super in the event of a divorce. Super is considered property and can be divided between partners by agreement or court order.
How long after a divorce can you claim superannuation Australia?
You have one year after your divorce to make a claim for the division of your assets, liabilities, and superannuation in Australia. Or two years after the date of separation if you were in a de facto relationship.
What is the average split in a divorce settlement in Australia?
The Family Law Act 1975 does not impose a set percentage split in a divorce settlement, it is entirely dependent on factors of your unique situation, such as the financial and non financial contributions of the parties, as well as their age, health and capacity to earn money post separation.
What are the superannuation splitting laws?
Superannuation splitting laws allow for the division of super assets during divorce, treating them as property without converting them into cash. The trustee of the superannuation fund is responsible for ensuring compliance with these laws and the applicable conditions of release.