If you and your partner separate, you must consider what will happen to the property you own and how it will be divided between the two of you. The process of deciding what assets, financial resources and liabilities to divide is known as a property settlement under family law.
Property settlements can be done between parties who are or have been married as well as couples who have been in a de facto relationship. A property settlement can also be dealt with or without the intervention of the Court. In this blog, we discuss property settlements, particularly in relation to what happens to superannuation during the property settlement process.
What is property?
The Family Law Act 1975 defines property as “property to which those parties are, or that party is, entitled, whether in possession or reversion”. It is commonly accepted that property can include, but is not limited to, superannuation entitlements, inheritances and business interests.
What happens to superannuation in property settlements?
Superannuation is commonly included in property settlement matters. If parties have superannuation entitlements, they can be dealt with as part of the same property settlement. This may be undertaken by way of an agreement between the parties, which can be implement through Consent Orders or a Financial Agreement, or by the intervention of the Court and obtaining court orders.
However, it is important to note when dealing with a superannuation interest, the first step is to ascertain the value of the superannuation interest. In most situations, this will be done according to various methods set out in the Family Law (Superannuation) Regulations 2001. A particular method to be used in each individual case will depend on the superannuation fund. If the parties are dealing with a fund for which there is no specific method of valuation provided in the Regulations, the Court will determine the value as it considers appropriate. Once the superannuation is valued, it is included in the property pool (assets that arose out of the relationship) either amongst the other assets or as a separate list, depending on particular circumstances.
Once the superannuation fund is valued, it can then be ascribed a value in the matrimonial property pool and can be dealt with by way of a consent order. A consent order is a written agreement that is approved by a court. A consent order can finalise financial arrangements between the parties, A consent order can either contain provisions that the parties either retain their superannuation entitlements or whether a portion is to be split to the other party. In such event that the superannuation entitlements of one party are to be divided, this is to be carried out by way of a ‘splitting order’.
A splitting order can be achieved by an order which allocates either an amount or a specified percentage from that party’s superannuation interest to the other party, which subsequently directs the trustee of the superfund to transfer their newly created entitlements into a separate superannuation scheme.
In some cases, it is unpractical to determine the splitting of superannuation entitlements at the same time when other property issues are being dealt with. For example, such determination may need to be postponed until a later stage in the proceedings because of certain difficulties with respect to the valuation of a particular superannuation interest. However, there may still be a need to protect the interest in question from being disposed of, which may occur in a situation where the member party who is the member of the fund is in the position to access his or her entitlements.
It is vitally important to understand how superannuation will be dealt with in your family law proceedings. If you would like more information on how we can assist you with your property settlement or if you have any family law general enquires, do not hesitate to contact one of our family law solicitors on 9963 9800 or at via the contact form here.