My superannuation is mine – isn’t it?
A common family law issue that arises when dividing assets of the parties upon separation is how to treat superannuation.
Since 2002 superannuation has been able to be “split” to give effect to a more equitable division of property between parties.
Before superannuation splitting laws
When we lived in a much more traditional society where one party was often the “bread winner” and the other undertook the “homemaker and parent” role, a reasonably long relationship could result in one party having a significantly valuable superannuation fund, with no way to divide that asset until superannuation splitting laws came into effect.
The division of assets between the working and the non-working party would often result in the non-working party taking the lion’s share of tangible assets such as the home and savings, with the working party taking mostly superannuation, which they could not benefit from until retirement.
This caused a significant injustice where the working party, whilst having a valuable superannuation fund, in actual fact had no access to tangible assets with which to re-establish themself.
Fast forward to 2020 and superannuation splitting is now a very common element of family law settlements.
What is a superannuation split?
A superannuation split is an Order that a Court can make, or an agreement parties can reach, which provides effectively a “roll out” of a portion of one party’s superannuation (usually the person who has a more significant portion of superannuation than the other) into the superannuation fund of the person who has a lower value (usually the non-working or lesser working party).
By doing this, both parties have an asset that they can draw upon in retirement, and, can equitably divide the remaining assets that are tangible and able to be utilised immediately.
Has Covid-19 affected how superannuation splits are negotiated?
The Covid-19 pandemic has created uncertainty throughout the world including in relation to stock markets globally. Many superannuation fund portfolios are made up of shares.
As a result of Covid-19, we have seen significant fluctuations in share markets and this has meant that, in some cases, superannuation funds have dropped in value by as much as 30%.
What this means for dividing assets in a property settlement is, that a suitably qualified lawyer needs to be very careful about how any superannuation splitting order is drafted.
If a superannuation fund is valued too soon, and, the market drops after that valuation, a superannuation split which uses a dollar figure to be rolled over into the ex-spouse’ name could significantly impact upon the superannuation fund left with the member who retains the balance after the split.
There are options available to ensure that a member does not pay more than what was intended in the family law negotiations, and this can include ensuring that the superannuation splitting Order takes effect retrospectively (back dated to the date the valuation was given) so that it still maintains the adequate proportion of the total superannuation value.
Alternatively, given the difficulties with making Orders that have retrospective effect, the parties can instead provide for the division of the superannuation fund to be on a percentage basis. However, this approach is not without risk as if you have agreed upon a percentage, and there is a delay between that agreement and when the splitting Order ultimately takes effect, each additional contribution made by the member after the agreement is reached, will also be divided to the non-member spouse.
What should be noted is that superannuation splitting can be complex, and you need an experienced family lawyer to provide adequate advice and ensure that your rights are protected.
For an initial free consultation about superannuation, or any other family law matter, please contact Catton & Tondelstrand Lawyers