Myth Busted: Superannuation and Separation

The myth

“I heard from a friend of a friend of mine that as long as you have been living with someone for 2 years, you are automatically entitled to 50% of their superannuation! Is that true?”

We hear statements like the above every day in family law!  There are a lot of misconceptions and misunderstandings out there about how family law works in Australia.  Today, we’ll set straight how the Court deals with superannuation interests (Hint – it is not usually as easy as just 50%). 

The reality

You have probably heard us talk about the 4-step process utilised by the Court in assessing property matters a few times now, but here is a quick refresher.  The Court takes the same 4-step process below in each family law property settlement matter:

• Calculate the Property Pool available for division;
• Assess the contributions to the relationship by each party;
• Assess whether there are factors relating to future needs for each party which need to be taken into account; 
• Come to a conclusion that is a just and equitable division of the Property Pool.

Superannuation fits in throughout this process as well.  When the Court is assessing the Property Pool for division, they include each party’s superannuation interest as property available for division.  However, the ultimate split is not as simple as 50/50, as the Court will weigh up each party’s contributions, the length of the relationship, and any future needs factors when they are coming to a decision as to how to split the Property Pool.  The Court may not split superannuation interests on every occasion, however, they have the ability to do so if they consider it to be just and equitable.

What does a superannuation split look like?

It is important to keep in mind that the Court’s power to split a superannuation interest is limited to the superannuation interest being transferred from one party’s name to another.  This means that the superannuation interests remain as superannuation, and cannot be ‘cashed in’, but simply transfers from one party’s superannuation account to the other party’s superannuation account.  The same rules in relation to access to your superannuation will continue to apply.

What are some instances that the Court may split superannuation?

The main instances where the Court will consider a superannuation split are if:

• If one party has been the primary homemaker or caregiver and has not had an opportunity to build up their superannuation interests to the same extent as the other party.  The Court may choose to split the superannuation of the party who has been the breadwinner so that the party that has been the homemaker can have superannuation available to them in the future as well.  The Court must weigh this up with what other property or cash each party is receiving from the Property Pool. 
• If the Property Pool is limited and the main asset is superannuation, the Court will consider splitting the superannuation assets. 
• The Court may attempt to ensure that each party has a mixture of superannuation and cash or property assets available to them moving forward so that each party is able to re-establish them immediately through cash and property, and also have superannuation available to them in the future. 

What you may be able to gather from the above, is that the division of superannuation and other property is a balancing exercise. The Court will attempt to ensure that each party has enough cash or property assets available to them to re-accommodate and re-establish themselves before they consider superannuation. 

For example, the Court may not consider that it would be just and equitable for one party to walk away with only superannuation assets and not have any immediate assets available to them, and one party to walk away with all the cash assets.  The Court will balance up the outcome of each option when they are coming to a decision. 

As family lawyers, we employ the same approach as the Court when we are assessing how to divide the property pool, and whether or not a superannuation split is necessary.  There are a lot of factors to take into account when assessing whether to consider a superannuation split, such as the value of each party’s superannuation, the age of party’s and length of time until they can access the superannuation, the other assets in the property pool, each party’s need, and the length of the relationship. 

Unfortunately, like everything in family law, there is no one size fits all approach regarding how to deal with superannuation. 

If you are considering whether or not a superannuation split may assist your property settlement, we recommend that you consult with a lawyer as to how to formalise this agreement. One thing to keep in mind about superannuation division is that the agreement or orders in this regard must follow a specific format in order to ensure the superannuation split is binding and enforceable.

If you would like to speak to us further in relation to the above, then book a free 30-minute CLARITY CALL with our team. We would be happy to have a chat with you to see if we can take any steps to assist.

***Disclaimer***

This article is for general information purposes only and does not constitute legal advice or any other professional advice.