Many people who are married or in long term relationships believe that the superannuation they have accumulate during their working life is their asset. However, this is not how superannuation is treated in the event of relationship breakdowns and you effect a property settlement. In simple terms it is considered a joint asset of the relationship and can be split.
When considering how to split a superannuation interest we must first ascertain the true value of the super. Superannuation is a complex area of the law and one which most people know little about. The governing legalisation of superannuation in Australia is the Superannuation Industry (Supervision) Act 1993 (‘SIS Act) and the Superannuation Industry (Supervision) Regulations 1994 (‘SIS Regulations’)
The SIS Regulations sets the Family Law related provisions and identifies the different types of superannuation interests including:
"accumulation" which are superannuation interests that are still the growth phase, meaning you can continue to make contributions to that interest;
"allocated pension" and "account based pensio" are superannuation interests that are in the payment phase.
Generally, when you reach retirement, your superannuation is paid to you in a lump sum for you to then manage or you can convert the lump sum into a pension payment. Some funds will contain a pension payment within your superannuation entitlement, these interests are referred to as a ‘defined benefit’ interest. A defined benefit interest will calculate the value of the pension attributed to the interest on retirement.
Self-managed superannuation funds are regulated by the Australian Tax Office, and it is imperative that you comply with these regulations otherwise significant fines can be incurred for being non- compliant. When considering splitting superannuation out of a self-managed superannuation fund you should ensure that the fund will not be in default as you may be responsible for fines incurred after you have rolled out your entitlement.
When considering dividing assets, you must first know the value of the assets to be divided, which includes identifying the value of your superannuation interest whether in the growth or payment phase. If you have a defined benefit interest the value if your superannuation and your pension will need to be identified.
Identifying the value of an accumulation fund is relatively simple and can be identified by obtaining a recent statement for the account. Defined benefit funds are more complex to value given the pension attributed to the accumulation entitlement, you will need to engage an expert to identify the value of the interest given the complex nature to valuing the pension entitlement. It is worth undertaking this exercise as the pension can be worth a significant amount to the person entitled to receive the pension. The pension cannot be split to the other party, however the accumulation amount within the interests can be. The value of the pension will be considered when identifying the value of the assets each party is to retain.
When recording the manner in which a superannuation split can be paid, it can be identified as a percentage spilt of the total amount held in the fund or a specific amount know as a base amount.
Generally, it is preferrable to identify the payment of a specific amount because if the payment is referred to as a percentage and the other party delays in effecting the spilt, it may result in the person receiving the payment being paid significantly more than they were originally entitled to as the value of the overall super interest has increased. You will need to discuss this with you lawyer as to what is the more beneficial approach for you.
When negotiating a property settlement, it is highly beneficial for you to obtain advice from a financial advisor so that they can workshop with you the options of retaining a higher super interest or retaining liquid assets which can otherwise be invested.
If you require any assistance regarding property settlement, our specialist team at Longton Legal are able to assist.
*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*
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