Family Law and superannuation in Western Australia
September 4, 2019
When couples divide their property after the breakdown of a marriage they have the option of splitting their superannuation in order to reach a fair and equitable agreement about the division of their property. Splitting does not convert superannuation into a cash asset – it is still subject to superannuation laws and is usually retained as superannuation until retirement ages are reached.
What about de facto couples?
Western Australia is the only State which does not currently allow superannuation splitting for separating de facto couples. In WA, de facto couples fall under the Family Court Act 1997, in which superannuation is defined as a “financial resource” rather than being treated as property. This means that in WA, superannuation of de facto couples is not counted as property in the event of a relationship breakdown. An adjustment may be made in favour of a party resulting in them receiving a greater proportion of the non-superannuation pool of assets if the other party has greater superannuation entitlements.
The only exception to this rule is if the superannuation is to be treated as vested – meaning that the parties have reached their preservation ages. In October 2018, the Attorney General announced that the Federal government will be making changes to the law as soon as possible to enable de facto couples to split superannuation. The inability of de facto couples to obtain a superannuation split in Western Australia can lead to an unjust family law settlement and changes to the law are well overdue. Our family law team at Paterson & Dowding are keeping a close eye on these legislative developments.
How is superannuation “split”?
Superannuation can be split either by an order of the Family Court of Western Australia or under a binding financial agreement that deals with a superannuation interest. Before asking the court to make orders or entering into an agreement, parties need to alert the trustee of the superannuation fund of their intention to split the member’s superannuation and send the trustee a copy of the proposed orders or agreement to ensure the wording is correct as per their trustee’s requirements.
How is superannuation valued?
When considering any superannuation split, determining the value of the superannuation interest is essential. The approach relied upon to value the interests of a fund will depend on the type of fund. There are two main types of funds: defined benefit and accumulation interest. The valuation of accumulation interest funds is usually relatively uncomplicated. However, the value of a defined benefit interest may need to be calculated by reference to a number of factors, including the member’s salary and years of service.
The Family Law (Superannuation) Regulations 2001 set out the methods and formulas to value certain superannuation interests, the way in which the payment split is to be put into effect and the information that the trustees have to provide.
What about self-managed superannuation funds?
There is no prescribed method for valuing interests in self-managed superannuation funds. This means parties can agree as to a value. If they cannot agree a value, they will need to put evidence before the Court to support a specific value. This will involve an investigation of the individual assets and liabilities of the fund and a determination of their value at a relevant date. Options available to separating spouses to provide for a fair split.
There are options available to separating spouses to determine a fair and equitable superannuation split. They include an equal split of superannuation funds; a percentage split; or nominating a particular value (lump sum) of the superannuation fund. The process of splitting superannuation entitlements can be very complicated and we recommend that you obtain tailored legal advice for your unique situation. Please call Paterson & Dowding Family Lawyers and Mediators on (08) 9226 3300 and make an appointment with one of our team of experienced family lawyers.