Superannuation splitting is the splitting of a person’s superannuation interest between each spouse after they have separated or divorced. This means that if you are married and divorced, your superannuation will be treated like any other property interest you might have in the divorce settlement.
Superannuation splitting should occur by an agreement between the two parties. If this cannot occur, the courts will impose an arrangement.
Like all financial and property matters, superannuation splitting can be very complex and, at a crucial point in the process, it is mandatory to obtain legal advice if any superannuation splitting agreement is to be effective. Even if you are at the start of the process, or have only just separated and need to know your rights and obligations, an experienced solicitor can help advise you of your entitlements or obligations.
Most forms of superannuation interest are subject to splitting, but there are a few exceptions. For example, payments made from a fund on compassionate grounds, or because of severe financial circumstances or ill health, are not splittable. Also, superannuation interests of less than $5,000 are not splittable.
Also, all superannuation acquired at any time is subject to splitting, not just the superannuation accumulated since you were married. There is no automatic, even splitting of the interest, so you cannot assume that there will be ‘50/50’ split to each party; you have to formulate an agreement that serves your own interests as well as your spouse’s. Furthermore, if it comes down to a court making the decision, the court has a very broad discretion to make any arrangement that it thinks is equitable.
In summary, the result of a splitting agreement or, if the matter is dealt with by the courts, the splitting order, is a ‘payment splitting’. Whenever a ‘member spouse’ – the spouse whose superannuation will be split – receives a payment into their superannuation account, an amount will be taken from it and paid to the ‘non-member spouse’ – the spouse who is not a member of the superannuation fund and will benefit by receiving a payment.
Different kinds of payment splitting
There are many kinds of payment splitting. One common example is when the non-member spouse has an interest created in the fund of the member spouse. This is called ‘interest splitting’ and means that the non-member spouse will have their own interest in the member spouse’s superannuation fund and will receive whatever amount is agreed to, or decreed by the courts. This will be drawn from the member spouse’s interest into the non-member spouse’s own, new interest in that superannuation fund. Alternatively, if they do not already have a superannuation interest of their own, the non-member spouse’s new entitlement can be rolled over into a new superannuation interest elsewhere.
All these steps will, however, cost you money as the trustee who administers the superannuation fund is entitled to charge fees to cover the costs of such administrative actions.
Applying for information
If you are a non-member spouse you are entitled to find out the necessary information about your spouse’s superannuation from the relevant superannuation fund. This can be a complex process. Some of the things you will be required to do include making a declaration about why you need the information. You have to meet stringent requirements designed to prevent people providing false or misleading information. In addition to these efforts, you will have to pay certain fees to the fund needed to cover cost of providing the information.
Furthermore, there you may only obtain certain kinds of information. You can get information about the value of your spouse’s superannuation, but what additional information you are able to get depends very much on what form of interest your spouse has in the superannuation fund; for example, whether it is an ‘accumulation interest’, a ‘defined benefit interest’, a ‘percentage-only interest’, or whether it is part of a self-managed superannuation fund.
Applying for information is an example of how the process can be difficult, confusing, and time-consuming. A solicitor can help make the application as efficient and accurate as possible and will help you to understand the information you receive.
Making an agreement and why legal advice is necessary
The law outlines a specific form that any superannuation splitting agreement must take in order to be a valid legal document. The advice of a solicitor during the agreement process is required by law for this part of the process. In addition to securing favourable terms, the key to ensuring that your interests are protected – whether you are the member spouse or non-member spouse – is making sure that the agreement is a document that will stand up to legal scrutiny. Once an agreement is concluded it must be provided to the trustee of the superannuation fund who will not execute the directions in that agreement unless it is legally watertight. It must include proof that each party to an agreement has obtained legal advice.
The most important details an agreement must contain are an amount of money specified, called the ‘base amount’, a clear method used to calculate what the base amount is, and the percentage of the member spouse’s interest that is to be paid to the non-member spouse. This can be complex depending on the type of interest the member spouse has and the process of negotiation between the parties. A lawyer will also help you to secure the best outcome for yourself in that negotiation process.
There are documents relating to your separation or divorce that have to accompany an agreement when you provide it to the trustee and a solicitor can help you piece together all the information and ensure you have met all the legal requirements.
Making a success of it
Marriage breakdowns are hard enough without yet another legal or property issue to be resolved. However, superannuation is an increasingly vital component of any person’s future and has to be dealt with in the same manner as property. The law provides a clear formula for doing this that but, like every other aspect of a break up, it can be painful and frustrating. The assistance of a solicitor can help make the process as discreet and efficient as possible, while ensuring that your interests are well protected.