When dividing assets in the Family Court after a relationship breakdown, superannuation is usually not the first thing that comes to mind. But superannuation is often a very significant asset and must be considered in any settlement.
For many people, superannuation is forced saving for their post-retirement lives. It’s also savings that they can’t access until they reach a certain age and leave the work force. And even if the superannuation forms part of a separation settlement the funds are still inaccessible until retirement age.
The Family Court has overcome the practical difficulties associated with the ownership of superannuation. Federal legislation now allows superannuation to be treated as a type of property. That is, it can be valued and split between the spouses.
Splitting involves some of the superannuation, as decided by the Family Court, being paid over into a fund for the other party which remains inaccessible until they qualify for payment either by retirement or age. The fund can continue to grow and can be added to.
Once the transfer is made, the original party’s superannuation is reduced by the amount of that transfer. How the separate superannuation accounts are then added to is a matter for each of the parties and their own financial arrangements.
Sometimes it’s more difficult where the superannuation account is ‘defined benefit’. A defined benefit is one where the amount of superannuation payable is determined at the point of retirement and is a multiple of the parties’ final salary. The multiple used depends on length of service. As a result nobody can tell what the superannuation is worth until the person retires and therefore dividing the superannuation prior to that date could be unfair to one party. To overcome this difficulty a notional division of the superannuation is made and the superannuation is determined on the date of retirement when the value of the two accounts, one for each party, are determined.
It is important for de facto or same sex couples to remember that in Western Australia they cannot split their superannuation. It is simply taken into account in the overall property settlement with each party retaining the superannuation in their name.