What Happens To Your Superannuation During Divorce-

When thinking about a property settlement, have you considered what will happen to your superannuation during divorce?  It is likely to be one of your major assets over your lifetime. Not considering the value of superannuation during divorce can severely impact your quality of life in retirement, especially if you have been a stay-at-home parent. It can come as a shock to the primary income earner to learn that he or she may have to split superannuation as part of the property settlement.

When finalising a property settlement, it’s important to understand how the law treats superannuation during divorce. The superannuation splitting law treats superannuation as a different type of property. It lets separating couples value their superannuation and split superannuation payments, although this is not mandatory. Splitting does not convert it into a cash asset – it is still subject to superannuation laws (for example, it is usually retained until retirement ages are reached).  Each party takes a separate share of accrued superannuation assets, either by a transfer of money into a different fund, or into a separate account in the same fund.

[Tweet “Did you know that you may need to split your superannuation during divorce?”]

superannuation during divorce, property settlement, divorceParties are encouraged to agree on the proportions of the split, with legislation supplying a default division of 50:50. There is a heavy emphasis on the promotion of private settlement of superannuation issues by the parties themselves.

However, the Family Court has some discretion to depart from an even split, in defined circumstances. These are:

  • where the amount of superannuation is too small to divide;
  • where there are multiple superannuation interests held by the parties;
  • where it would otherwise be necessary to sell the family home and that would cause disruption the care of children;
  • where it would be necessary to sell a business which would reduce the earning capacity of one of the parties.

If you are considering splitting superannuation during divorce, you should generally follow these steps:

 Find out the total value of  super accumulated while you were together. An eligible person can send a request to your partner’s super fund for details, even if you’re not a member of the fund. You can find the forms you need to provide to the trustee of the super fund on the Family Court of Australia website. Keep in mind that the super fund may charge a fee for providing the information.

Seek legal advice. Whether you come to an agreement with your partner about splitting your super or if you need to seek a financial order from the court if you can’t agree, you should seek independent legal advice. This area of the law can be complex, and objective advice will help you finalise your settlement.

If a court order is required, each partner’s contributions to the relationship are assessed. A court-issued financial order will decide how your super is divided. Like other assets, super is not necessarily split according to how much each of you contributed financially. For instance, contributions like taking care of the children and the family home may be taken into account, as may the future earning potential of each partner.

Split the super. If you and your partner reach an agreement, your arrangement should be detailed in your superannuation agreement. Make sure that you each retain a copy as it’s not registered in court. There are cases where it may not be possible or practical to split straight away – for example, if a settlement can’t be reached or when a super benefit is not to be paid until the member retires. In this instance, the super may have to be flagged until the benefit becomes payable or until an agreement or order regarding spitting is reached. This is why it’s often not straightforward, and why you may need legal advice regarding your superannuation during divorce.

What can you do with your super after it’s been split? As super is usually held for your retirement, in most cases superannuation that is split to you will need to remain within the super system until then. You can generally either establish a new account within the existing fund or transfer it to a new fund.

[Tweet “It’s a good idea to seek legal advice regarding splitting your superannuation during divorce.”]

superannuation during divorce, property settlement, divorceAs with any legal proceeding, there are complexities and pitfalls that are almost impossible to predict. A former soldier says he feels vindicated by a Federal Court decision in Brisbane over the way invalidity benefits paid to injured soldiers are split during divorce proceedings.

Bradley Campbell was a diesel mechanic in the army for 13 years, but was medically discharged in 2007. He was awarded a notional lump sum benefit, based on the extent of his disability, which has since been paid as a fortnightly pension.

But when his marriage broke down, the Commonwealth Superannuation Corporation which managed the military scheme deemed the payment a defined benefit as part of his superannuation. As such, it had to be split with his former wife.

Mr Campbell disagreed and complained to the Superannuation Complaints Tribunal, which dismissed his complaint. A two-year legal battle followed as Mr Campbell and fellow former ADF diesel mechanic Peter Burns fought to have their cases heard. Mr Campbell argued it was wrong to classify his invalidity benefit based on the notional lump sum, as the extent of his disability could be reclassified at any stage, with the fortnightly amount he received revised or eliminated altogether.

Outside the court, Mr Campbell said the decision marked a “definite win for veterans”.

“The injustices that have been done in the past, I certainly hope can be corrected. Because a lot of people, their lives have been destroyed by this,” he said. “It will now make the situation in the Family Court a lot fairer.”

Federal Court Judge Justice John Logan found partially in his favour, saying the invalidity benefit should not be deemed a defined benefit but an accumulation benefit. He said the Commonwealth Superannuation Corporation should recalculate the amount based on the new definition. The value of the invalidity pension in divorce settlements would now be calculated on a fortnight’s pay rather than the notional lump sum initially allocated.

This case illustrates why it’s not always as straightforward as you might think. Family law can be complex, particularly when strong emotions are involved. Please contact us for a free, 10-minute phone consultation with one of our friendly, experienced family lawyers.