OUR EXPERTISE AND APPROACH
We have expertise in giving advice and negotiating the fair division of superannuation. We take particular care to ensure that all of the complexities associated with superannuation are taken into account, including tax consequences. We look at the nature, form and characteristics of each superannuation entitlement and provide advice regarding the specific circumstances of each couple.
Hidden First Field
Binding death benefit nominations
Binding death benefit nominations in superannuation and beneficiaries on insurance policies
If you haven’t done so already, you should contact your superannuation fund and complete a new Binding Death Nomination Form, so that in the event of your death your partner does not receive your superannuation entitlements.
You should review and possibly change the beneficiary of any life insurance policies.
Self Managed Superannuation Funds
Self managed superannuation funds (SFSFs) need to be dealt with cautiously.
The Tax Office imposes heavy penalties if a SMSF does not comply with the laws which regulate SMSFs.
Members of self managed superannuation funds must also be trustees of the fund or directors of a corporate trustee of the fund. If both parties of a marriage or relationship are members of an SMSF, an added layer of complexity arises as both parties must continue to be involved as trustees of that fund until they are no longer members.
Assets in a SMSF may need to be sold to facilitate a rollover of entitlements or split to an alternate superannuation fund. The sale of assets may have capital gains tax consequences.
Superannuation is treated as property, and separating couples may split or flag superannuation by agreement or court order. It is not possible to split superannuation without such an agreement or court order.
Splitting superannuation entitlements
Superannuation entitlements of parties can only be split after separation. A superannuation entitlement can be split through either:
- an order of the Federal Circuit and Family Court of Australia
- a superannuation agreement
There are two main types of superannuation funds:
- Accumulation funds are the most common. They provide benefits to members based on contributions and earnings, less fees
- Defined benefit funds provide benefits to their members according to a formula set out in the trust deed. This formula usually takes into account the member’s length of service and final average salary
Whether to split?
Whether superannuation will be split and in what proportions will depend upon the circumstances of the case. Relevant factors include:
- whether there are children
- if splitting the superannuation means the primary carer can keep the home
- the needs of the parties for cash and saleable assets
- the value of all the property and the proportion of the property pool which is superannuation
- the type of fund
- the ages of the parties
- the length of time before the parties reach a condition of release
- tax implications
Valuing a superannuation interest
The court must value a superannuation interest which is being split. The method of valuation must be in accordance with the Family Law Act. An interest not being split can be valued another way, although it is unusual to use a different approach.
The majority of superannuation interests are accumulation interests in the growth phase. Valuations will, therefore, usually be straightforward. A recent member’s statement and/or a Superannuation Information Form completed by the trustee of the fund is usually sufficient to obtain the valuation.
An expert in superannuation may need to be engaged to value a defined benefit fund in accordance with a specific formula.
For self managed superannuation funds, the contents of the fund must be valued eg. shares, real property.
Disputes about the date of valuation of superannuation usually relate to the weight to be given to post-separation contributions. Assets are valued as at the date of trial or the time of settlement. Post-separation contributions may affect the percentage split rather than the value of assets. Often, if there are children of the marriage or relationship, contributions to the family after separation offset any contributions by the primary income earner to property, including superannuation after separation. However, if there has been a long period of separation, the superannuation contributions made after separation may be given greater weight than those made before separation.
Pensions in the payment phase pose particular challenges to the court and the outcome is dependant upon the particular circumstances of the pension and the parties. Some pensions are referable to a capital sum which can easily be identified. Other pensions are not. The valuation process gives a capital value to a pension even if the member can never receive a lump sum. In some circumstances the court must use the capital value, but in other circumstances, it does not need to rely on it.
Notice to superannuation funds
A court order or superannuation agreement that provides for a split of superannuation, is only binding against the superannuation fund if its trustee has been given an opportunity to consider the proposed order or agreement and does not object to it.
A “superannuation agreement” is a financial agreement that deals only with superannuation. As with financial agreements dealing with non-superannuation assets, a superannuation agreement must meet certain formal requirements to be binding. There are some additional requirements for superannuation agreements.
The grounds upon which financial agreements can be set aside are set out below.
A payment flag can be imposed on a superannuation interest by a superannuation agreement or a court order. A payment flag prevents the trustee of the superannuation fund from making any payments or transfers in relation to that interest.
Parties may want to defer making an agreement as to how to split superannuation. This may be because the member is nearing a condition of release. An interest in a defined benefit fund may appreciate sharply in value if the member reaches a threshold factor (ie age 55).
Setting aside agreements
Superannuation agreements can be set aside where:
- the agreement was obtained by fraud
- at least one of the parties entered into the agreement for the purpose of defeating the interests of a creditor
- the agreement is void, voidable or unenforceable
- it is impracticable for the agreement (or part of it) to be carried out due to circumstances which arose after the agreement was made
- a party with responsibility for the care, welfare and development of a child will suffer hardship
- the agreement is unconscionable
- there is no reasonable likelihood of a superannuation flag set by an agreement being terminated by agreement
- one of the superannuation interests covered is an unsplittable interest
There may be tax advantages to one or both of the parties splitting superannuation. Specialist tax and/or financial planning advice may be required.
Contact Forte Family Lawyers
Our professional Family Lawyers in Melbourne are ready to listen.
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