Superannuation - things you need to know

When a relationship breaks down, superannuation frequently represents a significant part of the asset pool of the relationship and often raises the most questions. Understanding how superannuation should be dealt with as part of a property settlement is important and can be complex as many factors can influence how much superannuation a person has been able to accumulate, for example, when a party has taken time away from the workforce to raise children.

Superannuation is treated as property under the Family Law Act 1975 and as such, can be adjusted, transferred or divided between parties. Although different to other assets (as it is held in a trust), it is generally subject to the same principles:

• All superannuation is taken into account, regardless of the acquisition timeline (before, during the relationship or after separation)
• It is not automatically subject to a 50/50 split. Ultimately, superannuation will be apportioned based on the ‘just and equitable’ principle, i.e. the court can only make an order about superannuation if it considers it to be just and equitable to do so.

The effect of splitting superannuation

Superannuation splitting can be achieved in two ways: through Consent Orders or through a Binding Financial Agreement.

Superannuation splitting does not immediately convert superannuation into a cash asset – it remains subject to superannuation laws and therefore generally only remains accessible upon reaching retirement age. In most cases, the superannuation is rolled over into a receiving spouse’s superannuation account and remains there until they are legally able to access it. Alternatively, a splitting order may permit the creation of a new interest for the non-member spouse.

Two-pool v global approach

You may have heard the terms “two-pool approach” and “global approach” being used in the context of family law property settlement matters and wondered what they mean. The two-pool approach, also known as the asset-by-asset approach, involves categorising assets into two pools. Looking at superannuation separately from all other assets takes into account factors specific to superannuation.

The two-pools approach can increase the complexity of a case and its use may not be advisable in certain circumstances. An example where the two-pool approach may be useful is where there is a significant amount of superannuation.

The global approach commonly involves applying the same percentage split to the totality of the parties’ assets and liabilities.

How much superannuation am I entitled to, or will I have to pay superannuation to my ex-spouse?

Many different factors influence the outcome of a final property settlement and what each party receives. Factors such as the duration of the relationship, each party’s contributions to the asset pool and the relationship overall, as well as ongoing needs of each party. Other factors, such as the age and health of the parties, dependent children, and the ability of each party to earn an income in the future will also have a significant impact. When considering the superannuation element of a family law property settlement, whether a party needs a cash asset could play a role in how superannuation is split. For example, if a party is closer to retirement age, it may be in their interests to retain as much of their superannuation as possible and divide other assets.

There are varying approaches in respect to valuing and determining the division of superannuation assets in family law matters. While there is some case law which sets out the principles that apply when considering division of superannuation, each case will be assessed based on its own particular circumstances.

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