Superannuation Splitting — Errors Family Lawyers Still Make

Superannuation splitting remains one of the most technically difficult areas of family law property practice, with errors in drafting, valuation, and procedural compliance continuing to create significant delay, unenforceable orders, adverse tax outcomes, and professional risk for legal practitioners.

This practical session examines the mistakes family lawyers continue to make in superannuation splitting matters, including issues involving defined benefit interests, self-managed superannuation funds and procedural requirements.

This paper covers:

1. Common drafting errors in superannuation splitting orders.
2. Problems arising from incorrect base amount calculations.
3. Practical traps involving defined benefit interests.
4. Self-managed superannuation fund (SMSF) complications, valuation disputes, and liquidity issues.
5. Errors in procedural compliance and service requirements.
6. Tax, preservation and timing mistakes affecting settlement outcomes.
7. Practical file management strategies to reduce negligence risk.

Common drafting errors in superannuation splitting orders.

1. In summary, the elements of drafting a superannuation splitting order which must be included are:
2. Allocate a base amount or percentage;
3. Give the non-member spouse an entitlement;
4. Bind the trustee to calculate the entitlement, and pay the entitlement when making a splittable payment; and
5. Set an operative time.
6. Since the relevant regulations changed, orders are often drafted using the old references due to reliance upon old precedent orders. Under a sunset provision, the Family Law (Superannuation) Regulations 2001 (2001 Regulations) expired on 1 April 2025. They were replaced with the Family Law (Superannuation) Regulations 2025 (FLS Regulations). Relevant changes include:
7. The former Pt 6 of the 2001 Regulations is now Pt 7 FLS Regulations. Part 7 deals with the “Entitlement of non-member spouse in respect of certain superannuation interests” and is commonly referenced in superannuation splitting orders.
8. The regulations were extensively revised and re-numbered.
9. An order cannot be made to split an unsplittable interest, which is defined in reg 14 of the FLS Regulations as primarily an interest with a withdrawal benefit of less than $10,000. Until 10 April 2025, the amount was $5,000.
10. Confusion of the operative time or date with the relevant date:
11. The operative time or date determines when a trustee must start to recognise the interest of the non-member after a splitting order is made. The relevant date is the date of determination of value ie. the valuation date;
12. The “operative time” has a different meaning in different circumstances. It is defined in s 90XD FLA as:

“(a) in relation to a payment split under a superannuation agreement or flag lifting agreement – the beginning of the fourth business day after the day on which a copy of the agreement is served on the trustee, accompanied by the other documents required under s 90XI.

• (b) in relation to a payment flag under a superannuation agreement – usually either:
• (i) the service time, if the eligible superannuation plan is a self-managed superannuation fund; or
• (ii) otherwise, the beginning of the fourth business day after the day on which the service time occurs (both (i) & (ii) are under s 90XK(1)); or
• (iii) if s 90XLA applies, the time that the payment to the trustee of the new ESP is made (s 90XLA(2)(c)).
• (c) in relation to a payment split under a court order, the time specified in the order”.
• In relation to a superannuation agreement, the operative time is the beginning of the fourth day after the agreement and any other relevant documents are served upon the trustee (s 90XDA(a) FLA), but a court order can theoretically nominate any date.

1. The two most common splits are percentage and base amount or dollar splits. Whether a percentage split or a dollar split is appropriate should be given careful consideration and the failure of a legal practitioner to consider both options and explain the differences to the client may result in difficulties, including a professional negligence claim.
2. In Stevens and Stevens (2005) FLC 93-246, three technical defects in the orders were corrected, which remain common:
3. A failure to identify the “type” of order made pursuant to s 90MT Family Law Act 1975 (Cth) (FLA) (now s 90XT(1) FLA), by reference to s 90MT(1) FLA (now s 90XT(1) FLA) under which the order was made;
4. The order provided that the interest of the husband in the superannuation scheme “shall be split”, whereas the power to make orders is confined to splitting payments;
5. The entire order was expressed to bind the trustee, including clauses which were of no concern to the trustee, and the trustee should only be bound by those clauses that relate to the trustee’s obligations.

Problems arising from incorrect base amount calculations

1. A superannuation split of a dollar amount, rather than a percentage split, requires the setting of a base amount.
2. If the base amount is incorrect, the trustee of the fund cannot simply correct it, even if both parties agree. The splitting order must be either corrected under the slip rule, rule 10.3 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Family Law Rules) or varied under s 79A(1A) or 90SN(1A) FLA.
3. The base amount is adjusted by the trustee from the operative time until the date of transfer of the transferable benefits (reg 1.03 of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) or the creation of the new interest. This is done by either:
4. Accumulation interests – The base amount rises or falls with the fund’s performance from the operative date, as the non-member’s interest is calculated as at that date. Once the fund has effected the split and before the interest is rolled over into the non-member’s fund, the fund will have policies as to how any adjustments are made to the interest; and
5. Defined benefit or SMSF interests – The base amount is adjusted by the annual interest rate prescribed by reg 77 of the FLS Regulations. For the 2025-26 and 2026-2027 financial years this is 6.1%.
6. If the base amount is greater than the total value of the member’s superannuation interest (either because of an error or superannuation has fallen in value or some superannuation has been withdrawn by the member) the superannuation fund cannot implement the order.
7. Factors to consider with respect to whether a percentage split or a base amount split is appropriate include:
   1. If a percentage split is ordered rather than a base amount, the non-member will benefit from the contributions made by the member after the date at which the superannuation was valued and the orders were made. If there is a delay of years before the order is implemented (either because the fund does not allow the non-member to receive their interest until the member is entitled to payment from the fund, or the parties do not promptly take steps to implement the split) the non-member may benefit from the delay;
   2. Percentage splits of accumulation interests move with the market – whether the market rises or falls. A percentage split of 50% of $400,000 as at the relevant date will be 50% of the superannuation interest as at the operative date or $205,000 if the interest has increased to $410,000 or $195,000 if the interest has fallen to $390,000. The non-member’s interest will then be adjusted in accordance with the fund’s policies. It may, for example, move with the market or a pre-determined interest rate. However, a base amount split of the $400,000 will be $200,000 regardless;
   3. Percentage splits are particularly useful when there is an ongoing pension which will be CPI indexed as the parties know what proportion of each payment the non-member is entitled to, regardless of the total dollar amount payable to the member over time;
   4. Percentage splits enable parties to ensure a precise 50/50 division of their superannuation. Baines & Baines [2016] FCCA 1017, is an example of a complex splitting order. To ensure that the superannuation entitlements were split equally, Scarlett J adopted the “cross split order” proposed by the single expert. The wife’s entitlement in the self-managed fund was split 100% to the husband and then the husband’s entitlements were split 50% to the wife;
   5. Percentage splits can be used where there are multiple funds to ensure that the total of all the funds is split in the desired amount or percentage. A base amount split may end up being unfair to one of the parties as the value of each fund can fluctuate from the date on which the base amount is calculated, due to such matters as:
      1. A delay between the valuation being obtained and agreement being reached;
      2. A delay between an agreement being reached and orders being made;
      3. A delay in providing procedural fairness to the trustee;
      4. One party and/or their employer making greater contributions than the other party, which contributions are to be shared.
8. Procedural fairness can be given to the fund or funds at an early stage of the negotiations or the proceedings and it does not need to be given again, perhaps at short notice when the matter resolves, using updated base amounts. The orders can therefore be made without further delay.

Practical traps involving defined benefit interests

1. A defined benefit fund (DBF) provides benefits to members according to a formula specified in the trust deed rather than based on the earnings of the funds. The formula usually takes into account the member’s length of service with an employer or years of membership of the fund and the final average salary or level of salary nearing retirement. A DBF is defined in reg 6(1) FLS Regulations.
2. The complexity of valuing a DBF interest arises, in part because the valuation is valuing the current value of an interest which is essentially a promise to pay out at a future and unknown date. Also relevant is that many DBFs offer pensions which are higher than another person could obtain with the equivalent lumpsum.
3. The most common trap is incorrect assumptions about the value of a defined benefit interest. Depending upon the fund:
   1. The value for family law purposes may not be the value on the member’s statement or a screenshot of the member’s entitlements from the fund website;
   2. To obtain the family law value the steps are:
      1. Ask the fund to complete a Superannuation Form. This may give the family law value. If not, the next step must be taken; and
      2. Ask an expert in valuing superannuation entitlements to value the interest.
4. The scheme value is calculated in accordance with the governing legislation (or deed) of the fund. However, it is the family law value which must be used if the superannuation is being split. Section 90XT(2) FLA states:

“Before making an order referred to in subsection (1), the court must make a determination under paragraph (a) or (b) as follows:

(a) if the regulations provide for the determination of an amount in relation to the interest, the court must determine the amount in accordance with the regulations;

(b) otherwise, the court must determine the value of the interest by such method as the court considers appropriate.”

1. The family law value is calculated in accordance with either the special scheme or factors approved by the Attorney-General for that particular fund, or the FLS Regulations.
2. Usually, the scheme value is higher than the family law value. Why is the family law value different from the scheme value? The main reasons are:

• Different formulas
• Gender. Women have slightly longer life expectancies
• Age. The younger the member the more that the scheme value is discounted to achieve the family law value

1. It cannot be assumed that all DBFs treat superannuation splitting orders in the same way. Information should be obtained from the funds as to how the order will be interpreted.

Bulow & Bulow (2019) FLC 93-885, Bulow & Bulow (No 3) [2021] FCCA 314 and Bulow & Bulow [2022] FedCFamC1A 19

There is a long series of cases involving these parties, most of which involve superannuation.

In the 2019 case the parties’ experts agreed that $66,100 was the portion of the family law value of the husband’s PSS superannuation that was attributable to him making contributions at the rate of 10% of salary, rather than at 2% of salary after separation. The experts made it clear that the direct financial contributions made by the husband had a direct impact upon specific variables which in turn directly impacted upon an increased value of the fund. The trial judge equalised the parties’ superannuation and to do this made a splitting order to split a base amount of $173,154 to the wife, leaving the husband with $462,859.

The Full Court of the Family Court accepted that the trial judge had not properly considered the husband’s direct post-separation contributions to his superannuation. The Full Court also pointed out the importance of examining the terms of the fund (at [20]):

“Crucially, however, defined benefit funds are not regulated by Part 7A of the SIS Regulations. It is therefore fundamental to a consideration of any proposed splitting order that the Court consider the governing rules of such funds contained within their specific trust deeds. It is those rules which will determine the effect of any splitting order on the underlying interest within that particular fund. As an example, within a defined benefit fund the fund’s rules can dictate that a splitting order has significant effects on the formula by which a member’s ultimate entitlement is calculated”.

The Full Court discussed the distinction between the splitting of defined benefit interests and accumulation interests (at [22]-[23], [25]):

“By reason of the matters just discussed, it is an error both to fail to consider the specific requirements and ramifications of the PSS Deed’s provisions and to assume that the effect of a s 90XT(1)(a) FLA order upon the husband’s defined benefit interest is the same as it would be if the husband held an accumulation interest. It is also an error to assume that the effect of a splitting order for the non-member spouse is the same as it would be in respect of an accumulation interest.

The terms of the scheme-specific PSS Deed will dictate the variables by which the husband’s present and future benefit will be calculated subsequent to any mooted splitting order. So, too, the PSS Deed will dictate the nature, form and characteristics of the interest which the wife will acquire subsequent to any such order. The justice and equity of any proposed splitting order cannot be considered without reference to both. Axiomatically, those matters are crucially relevant considerations in the exercise of a trial judge’s discretion in the making of a splitting order . . .

The nature, form and characteristics of the interests held by each of the parties consequent upon the proposed splitting order; the future benefits for each party upon vesting; when the respective interests might vest and the form in which any benefits might (or must) be taken at that time, are all likely to be relevant in assessing the s 75(2) factors. As an example, in this case the husband asserts before this Court that the splitting order made by his Honour restricts the amount he can contribute from salary and, thereafter, his ultimate potential benefit”.

The husband had unsuccessfully sought to obtain expert evidence on the effect of a splitting order on his defined benefit interest. Although the parties each had expert evidence as to the value of the husband’s interest, the Full Court said (at [28]):

“Neither expert provided an opinion on the nature, form and characteristics of the husband’s superannuation interest nor how any splitting order sought by the wife (or any other splitting order) might impact upon that interest”.

Furthermore, it said the trial judge had failed to refer to (at [50]):

“… the particular nature of the husband’s interest; the specific evidence about the increase in the value of that fund; the derivation of that increase; and any specific comparison between that contribution and specific contributions made by the wife …”

The Full Court concluded (at [109]):

“In light of our conclusion that his Honour was not favoured with evidence as to the ramifications of the proposed, or any, splitting order, it is not possible for this Court to contemplate re-exercising the discretion; the evidence before us does not permit of that outcome. Unfortunately for the parties, the matter must be remitted for rehearing.”

In the 2021 case Judge Heffernan explained the different consequences for growth of the parties’ respective interests in the PSS following the splitting order which had been successfully appealed against (at [62]-[63]:

“It is relevant to consider the comparative future growth of the associate preserved benefit and the future growth of the member entitlement. In the event that I make a splitting order, Ms Bulow’s associate preserved benefit will be comprised of a funded component and an unfunded component. The funded component would be allocated interest earnings by the scheme which would reflect the performance of the scheme. The unfunded component would be allocated interest at the long term bond rate for Treasury bonds having a ten year term. Her total entitlement would be the combined value of the funded and unfunded components. As Mr Bourke has observed in his report, the superannuation interest of the husband would continue to increase after a splitting order with benefit multiple and salary. I take into account that any splitting order I make will have a corresponding effect on the husband’s entitlements and to that extent he will suffer a detriment. Mr Bourke gave oral evidence on this matter:

The advantage of this scheme to the member is that while there is a reduction in his end benefit because of the allocation of the associate benefit, it still accrues at a very handsome rate …

Mr Bourke said that in practical terms that could be demonstrated by reference to the splitting order made by me at the time of the first trial. Had that order not been overturned on appeal, then during the period between the order and the 2020 valuation obtained for the purpose of this trial, the wife’s associate preserved benefit would have increased by approximately $26,000 and the husband’s member entitlement would have increased by $213,000.”

This was quite disproportionate to the amounts they each retained from the husband’s fund. The husband was to retain about 72% of the superannuation and the growth on this would have been about 30%, whereas the growth on the wife’s interest would only have been about 15%.

An appeal against the equal splitting of superannuation made at the second trial was dismissed in Bulow & Bulow [2022] FedCFamC1A 19.

Campbell v Superannuation Complaints Tribunal [2016] FCA 808

The correctness of many of the cases which involve the valuation of a pension in the payment phase was thrown into doubt by this Federal Court’s decision. Justice Logan heard an appeal from the Superannuation Complaints Tribunal (Tribunal). He held that Mr Campbell’s vested entitlement to an invalidity pension was, for the purposes of the FLS Regulations, an “accumulation interest”. Mr Campbell was receiving invalidity benefits under the MSBS. He applied for information about his superannuation interest in the MSBS under s 90MZB (now s 90XZB) FLA using a superannuation information form. The Commonwealth Superannuation Corporation (CSC) provided 2 responses: one with respect to his preserved benefit which was in the growth phase and one with respect to the invalidity pension which was in the payment phase.

Mr Campbell objected to receiving information with respect to his invalidity pension and argued that it was not superannuation. The Federal Court accepted that it was superannuation. It was not disputed that MSBS was a superannuation fund within the meaning of the SIS Act and thus, within the definition of s 90MD (now s 90XD) of an “eligible superannuation plan”. That definition is “an interest that a person has as a member of an eligible superannuation plan”.

However, Logan J found that the invalidity pension was not a defined benefit interest as reg 5(2) 2001 FLS Regulations (now reg 6(2) FLS Regulations) removed it from the scope of reg 5(1) because the pension was “only payable on invalidity”.

Regulation 5(2) stated:

“A superannuation interest, or a component of a superannuation interest, is not a defined benefit interest for these Regulations if the only benefits payable in respect of the interest, or the component, that are defined by reference to the amounts or factors mentioned in subregulation (1A) are benefits payable on death or invalidity”.

The effect of the determination of Mr Campbell’s invalidity pension as an accumulation interest rather than a defined benefit interest on its value was not set out in the judgment. Logan J remitted the matter to the Tribunal.

There is an even greater need for specialist superannuation advice regarding invalidity pensions in the payment phase now than there was before Campbell.

The reasons for the decision in Campbell were explored by Stephen Bourke in “Invalidity Pensions after Campbell v SCT” Australian Family Lawyer, 26/2, August 2017. He also explained the effect of the decision, specifically with respect to the MSBS (taking into account amendments to the Scheme as a result of the decision in Campbell) and more generally with respect to hurt on duty pensions in the payment phase. Mr Bourke pointed out that the “method approved for the calculation of the amount to be taken as the value under reg 43 of the 2001 FLS Regulations (regs 66 and 67 of FLS Regulations) only applies to pensions payable for life and the approval instrument (see Family Law Superannuation (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003) (now Family Law Superannuation (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2025 “2025 Approval”) does not apply to pensions other than pensions payable for life”.

Mr Bourke emphasised the importance of ascertaining whether the pension is a lifetime pension or a fixed term pension payable only until the next medical review when payments may either cease or continue. He also outlined the need for reform in this area taking into account the complexities of defined benefit superannuation and the individual schemes.

Suris & Suris [2021] FedCFamC1F 1

Justice Carew distinguished the facts from Campbell as the member had received a lump sum payments rather than ongoing pension payments from the MSBS.

Blackwell & Blackwell [2022] FedCFamC2F 66

The husband sought a discrete ruling that his permanent disability pension was not superannuation (and was therefore not property) but a financial resource or alternatively should be dealt with in a discrete pool. He argued, consistently with Campbell, although the court did not say which superannuation fund it was dealing with, that his permanent disability pension was not superannuation because it was paid by virtue of a medical condition.

The information provided by the fund confirmed that the husband’s interest was a “superannuation interest in the payment phase”, it was a splittable interest and that the lump sum valuation of the disability pension, calculated using the standard method as prescribed in the 2001 FLS Regulations was $976,925.38 at 20 February 2021 and $979,524.79 at 27 May 2021. Furthermore, the husband had an option of taking a lump sum payment in lieu of his pension at ages 60 or 65.

Judge Middleton concluded (at [16]-[18]):

“It is quite clear that the Respondent is a member of C Super Fund and furthermore, it is clear that C Super Fund is a superannuation fund within the meaning of the SIS Act and is therefore by virtue of section 90XD an eligible superannuation plan.

I am satisfied that the Respondent has a superannuation interest as defined in section 90XD because his interest comes about by virtue of his membership. Furthermore, the correspondence of 17 June 2021 specifically states that the Respondent’s interest is a “superannuation interest in the payment phase”.

Accordingly, I am not satisfied that the Respondent’s interest in C Super Fund is a financial resource.”

Carron & Laniga (2019) FLC 93-909; [2019] FamCAFC 115

The Full Court of the Family Court agreed with the trial judge’s approach that the wife’s MSBS superannuation interest in the growth phase should be taken into account as property but that the MSBS pension, which was a continuing but modest income stream that could not be commuted or alienated, should be taken into account as a financial resource. As the husband sought no splitting order in relation to it, the pension did not need to be given a capitalised value under the Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 (Cth) (now replaced by the 2025 Approval).

Summary with respect to DBFs

The above illustrates the necessity in relation to DBFs of:

• Carefully examining the scheme entitlements, whether acting for the member or the non-member. This will usually require the obtaining of expert advice
• Examining whether an asset by asset or global approach should be taken
• Applying s 79/s 90SM
• Comparing the scheme value and the family law value
• Is it being paid or will it be paid as a lump sum or pension?
• Looking at whether the pension is commutable to a lump sum
• Can the non-member’s entitlements be rolled out immediately?
• Considering whether a flagging order may be appropriate
• If a pension, is it due to invalidity?

Self-managed superannuation fund (SMSF) complications, valuation disputes and legality issues

1. The main distinction between SMSFs and industry or retail funds is that the members of an SMSF are also usually the trustees of the fund. SMSFs are regulated under the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act), and the ATO (rather than APRA) regulates SMSFs and verifies their compliance. There may be compliance issues. Anecdotally, SMSFs are probably more likely to be non-compliant in proceedings under the FLA given the emotional and financial stresses of separation and litigation.
2. A non-compliant SMSF risks losing the tax concessions associated with superannuation funds meaning that tax penalties and interest may be payable which may be quite high. Its assessable income is taxed at the highest marginal rate. There are other restrictions, such as the inability of a non-compliant SMSF to open a bank account, rollover entitlements into the SMSF or have superannuation guarantee contributions paid into it by an employer. The trustees may be issued with an education direction and ultimately may be suspended, removed and/or disqualified (s 133 SIS Act).
3. To check the status of a SMSF use the ATO’s Super Fund Look Up. The options are:

• Regulated — not yet assessed as complying
• Complying — has been issued with a Notice of Compliance
• Non-complying
• Regulation details withheld — may be temporary but needs investigation
• Regulation details removed — annual returns not lodged

1. Members of an SMSF must usually be trustees (or directors of a corporate trustee) and trustees must also be members (SIS Act s 17A(1)). This means that both parties to the marriage or de facto relationship need to be trustees of the fund or directors of the corporate trustee. The main exception to this is if the SMSF has only one member. If the SMSF has only one member and there is a corporate trustee, there does not need to be a second director who is a member. If there is no corporate trustee, the second director must be a relative of the member (SIS Act s 17A(2)).
2. Each trustee or director is jointly and severally liable for breaches of the obligations imposed on trustees (SIS Act s169). See Re Shail [2011] AATA 940.
3. In certain circumstances, a member cannot be a trustee or director of a trustee company. For example, s 120(1)(b) SIS Act prohibits a member from being a trustee if they are insolvent and s 206B(3) prohibits that member from being a director of a company. The Federal Court can, however grant leave. Macalister, in the matter of an application by Macalister [2021] FCA 1455.
4. Common problems with SMSFs in family law matters include:
   1. financial statements and taxation returns not completed in a timely fashion;
   2. failing the residency test. There are various requirements but a common breach is that a member with more than 50% of the SMSF is no longer an Australian resident. Part of the residency test is that central management and control is ordinarily in Australia s 295-95(2) of the Income Tax Assessment Act 1997 (Cth);
   3. acquiring an asset from a related party not at market value;
   4. lending funds to a member;
   5. not investing properly. Often funds are simply left in a bank account. This is not, in itself, necessarily a breach although the fund is required to have an investment strategy and this may be an indication that there is no investment strategy or it is not being followed. In these cases, especially in a low interest rate environment, parties may be financially better off using an accumulation fund;
   6. use of fund assets for personal use (eg bank account, holiday house and even a family home), which is a breach of the sole purpose test (SIS Act s 62);
   7. incorrectly categorising the taxation status of funds held by the SMSF; and
   8. investments which are not approved for superannuation funds.
5. Another problem with SMSFs is if the underlying assets illiquid or “lumpy”. A strategy may be required to ensure that the interest of one party is properly transferred to another fund. A sale of the lumpy asset will usually be ordered so that the split can be effected even if this results in a substantial reduction in the value of the fund due to the timing of the sale, high sale costs CGT etc.
6. If the fund is non-compliant:
   1. Independent expert advice may be desirable as to the works and costs required to make the fund compliant. Professional advice should be sought as to how to deal with any potential tax penalties;
   2. There are ongoing risks for a party resigning as a trustee. Liability for a penalty is joint and several (s 169 SIS Act). An order that the remaining trustee indemnify the resigning trustee for any penalties may be difficult and expensive to enforce; and
   3. The courts will usually make orders that the non-compliance be rectified as recommended by an accountant or other expert.
7. If the SMSF’s financial statements show current values of the assets in the fund, these can be used to value the fund. However, the valuations in the financial statements are usually not current or easily updated: publicly listed shares may be, but real estate, shares in unlisted companies and units in unit trusts are not. In addition, sales and purchases may have taken place, interest or dividends may have been earned and taxation or other expenses incurred since the financial statements were prepared.
8. One of the main issues which arise with SMSFs is that if both parties are members of the fund and one member’s interest is to be split, the orders need to provide for:
   1. The split of one member’s interest to the other;
   2. AND
   3. The rollover (or transfer out of the transferable interest) to another fund.
9. The parties need to agree (or court orders will be made after a contested hearing) on the values of the assets of the SMSF and whether any latent CGT is notionally deducted. SMSFs must be valued annually for the financial accounts. There are also certain events when the values need to be updated. The Australian Taxation Office (ATO) has guidelines for valuing the assets of SMSFs “Guide to valuing SMSF assets”  https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-administration-and-reporting/guide-to-valuing-smsf-assets. In relation to real properties the ATO’s guidelines state:
10. “When valuing real property, relevant factors and considerations may include:
11. the value of similar properties and recent comparable sales results
12. the amount that was paid for the property in an arm’s length market, if the purchase was recent and no events have materially affected its value since the purchase
13. an appraisal from an independent real estate agent
14. whether the property has undergone improvements since it was last valued
15. net income yields for commercial properties (not sufficient evidence on their own and only appropriate where tenants are unrelated).
16. Unless the property has been recently purchased by the fund, you should consider a variety of sources to substantiate the market value of real property. Generally, it is not sufficient for valuations to be based on only one item of evidence in this list.
17. A valuation done by a property valuation service provider, including online services or a real estate agent, are acceptable. If this is the sole source of evidence being relied upon to substantiate the real property valuation, the valuation should specify the supportable data. For example, in the case of a real estate agent appraisal or online report, the valuation should list the comparable sales it relied on.”
18. If a member’s interest is in pension mode there will be no CGT payable, but otherwise it may be built into values.
19. The operative date may be quite separate from and many months later than the relevant date (date of valuation). The FLS Regulations provide for an uplift but SMSFs may not bother with this.
20. There may be liabilities to take into account in determining the values of a SMSF and each of the member accounts. Capital gains tax (CGT) may affect the valuation of the fund if the requirements of Rosati & Rosati (1998) FLC 92-804 are met. It is important to ascertain whether the CGT will definitely be incurred. If it will not be incurred immediately or in the near future, it should not be taken into account in valuing the SMSF. The CGT may not eventually be payable or the amount may vary due to changes in the member’s circumstances, tax laws, etc. CGT rollover relied is discussed below.
21. Usually, the parties will agree that the expenses incurred in relation to the split of a SMSF (eg. sale costs, any CGT, accounting fees) be borne by the parties in proportion to their entitlements or equally, but reg 5.02 SIS Regs does not require this. Other options are possible. Reg 5.02 SIS Regs requires that the costs of implementing a payment split be distributed in “a fair and reasonable manner.” The order needs to be drafted carefully to set out how this will occur.
22. Since 1 October 2021, SMSF trustees have been required to use SuperStream and are covered by the SuperStream rollover standards. There was a concern that certain funds were taking too long to roll over members’ benefits when requested to do so. SuperStream is the way businesses pay employee superannuation contributions to superannuation funds. SuperStream is operated by the ATO. It transmits money and information between employers, superannuation funds and the ATO.
23. If trustees do not process a rollover within the strict time limit of 3 business days from the request being made they may breach operating standards for SMSFs and could face financial penalties for each contravention of up to $4,400 for each trustee. The SuperStream standard does not apply to all rollovers. The exemption of family law super splits from the SuperStream standard was confirmed by the ATO but if a member wants to roll out their existing entitlement (without any split on top) this is subject to the three business days rule.
24. The requirement to process rollovers quickly may be particularly difficult for SMSFs which don’t have financial statements updating in real time and those with investments that cannot be liquidated quickly. By contrast, industry and retail funds usually update their records on a daily basis and can produce a daily unit price as well as maintaining sufficient cash to enable them to pay out rollovers in a timely fashion. If a rollover is requested, a SMSF will usually need to prepare interim financial statements to enable the rollover amount to be calculated. This work may be difficult to complete in the requisite short time-frame.
25. What can the trustees of SMSFs do to avoid SuperStream problems?
    1. Start planning after the parties separate to ensure that:
       1. There is sufficient cash to pay out a rollover if one party will want to rollover into an industry or relevant fund rather than into another SMSF;
       2. Taxation consequences are considered; and
       3. Accounts are kept as up-to-date as possible and are easily and quickly updated.
    2. Negotiate a reasonable time-frame for the rollover so that the accountant for the SMSF has sufficient time to prepare the accounts before the rollover request is made; and
    3. Request that orders be drafted which allow sufficient time to ensure there is no breach.

Powell & Christensen [2020] FamCA 944

The court ordered that the parties make the SMSF compliant before they made submissions as to how the superannuation and non-superannuation property be adjusted between the parties. The court found that it was unable to value the parties’ interests until the parties had paid the funds required to make the SMSF compliant.

The father did not cooperate with the process and the mother had to obtain enforcement orders dispensing with the necessity for his co-operation. The father’s main objection was that he wanted one of the parties to do the work to make the fund compliant and did not want to pay accountants. The court ordered that the parties engage the accountant to do the work.

An appeal was dismissed in Christensen & Powell [2020] FamCAFC 148.

Aldam & Cesari (No 2) [2020] FamCA 732

The husband’s proposal for the wife to be paid a lesser amount of non-superannuation rather than 50% of his superannuation was rejected. The husband argued that a discount should apply to the wife’s entitlement because on his approach the wife would enjoy the benefit of immediate access to funds, and the wife would not be burdened by hardship as she would be free to invest that money in another fund, property, shares or other appreciating assets. The husband would retain the benefit of his interest in the SMSF. He said that given the ages of the parties, he would not have access to those funds for a considerable time, that the 30% discount rate proffered was reasonable under s 75(2) (now s 79(5)) FLA and in the event that an order for a sale of the real property was made the husband would first want an opportunity to buy out the wife’s share in the property owned by the fund.

The husband argued that a sale of the real estate was an unnecessary erosion of the value of the fund. The court rejected this proposition and said the erosion was more apparent than real, as on his proposal the husband would be left with the real property at full value whereas the wife would receive a discount of 30% on her 50% share of the property thereby reducing her entitlements to the fund from $102,718 to $71,524. By contrast, the husband would be left with very valuable real estate in his sole name.

The court held that the husband’s proposal was likely to have the effect of occasioning undue hardship on the wife.

Odens & Odens [2021] FCCA 575

After over 22 years of marriage there was insignificant property available for distribution between the parties except for superannuation.

The wife had superannuation of $79,000 in an industry fund. The husband’s superannuation was in a retail fund until he unilaterally moved it into a SMSF which he valued at $284,000. The SMSF owned a residential property which the husband valued at $410,000 and was subject to a mortgage of $203,000. The SMSF had other liabilities including a loan to the husband of $79,000.

The wife was alarmed at the prospect that if she had entitlements in the SMSF, the husband could detrimentally affect her entitlements by borrowing further amounts from the SMSF. The husband was concerned that the sale of the residential property might attract capital gains tax. He considered a sale to be financially improvident and wanted the wife to retain an ongoing interest in the SMSF.

The wife sought a 50/50 split of the husband’s interest in the SMSF and that her 50% be rolled out into a fund of her preference. She sought a 65%/35% division in her favour of her own superannuation because it was primarily acquired after separation. Rather than a split of her superannuation which would be $27,549, she sought that the husband’s share be notionally allocated to her as costs as the husband had unduly protracted the proceedings.

The trial judge pointed to the advantages of the superannuation being managed by a professional trustee, advantages which had been denied to the wife by the husband’s unilateral actions in setting up a SMSF. A superannuation split of 50% in favour of the wife was ordered with the husband to bear all the costs of implementing the split.

The trial judge, after considering s 117 (now s 114UB) FLA, agreed that the wife was entitled to indemnity costs and this should be paid by not making the super splitting order in favour of the husband of the wife’s fund and he could do this as a s 75(2)(o) (now s 79(54)(v)) factor.

Errors in procedural compliance and service requirements.

1. The most common errors in procedural compliance and service requirements are:
   1. Incorrect drafting of the order so that it cannot be implemented eg. name of trustee, fund, and member, base amount too high;
   2. Splitting a fund without regard to additional benefits provided to the member by the fund, when splitting another fund may not have the same consequences. For example, many industry superannuation funds provide cost-effective life, total and permanent disability (TPD), and income protection insurance. Check that the client knows that these benefits may be lost if that fund is split; and
   3. Delay in service of order on the trustee.
2. Procedural fairness not given.

RULE 10.06 Notice to superannuation trustee

This rule applies in a financial or property proceeding if a party intends to apply for a consent order that is expressed to bind the trustee of an eligible superannuation plan.

The party must, not less than 28 days before lodging the draft consent order or filing the Application for Consent Orders, notify the trustee of the eligible superannuation plan in writing of the following:

the terms of the order that will be sought to bind the trustee;

the next court event (if any);

that the parties intend to apply for the order sought if no objection to the order is received from the trustee within the time referred to in subrule (3);

(d)that, if the trustee objects to the order sought, the trustee must give the parties written notice of the objection within the time referred to in subrule (3).

If the trustee does not object to the order sought within 28 days after receiving notice under subrule (2), the party may file the application or lodge the draft consent order.

Despite subrules (2) and (3), if, after service of notice under subrule (2) on the trustee, the trustee consents, in writing, to the order being made, the parties may file the Application for Consent Orders or lodge the draft consent order.

1. Orders made without notice to the trustee are voidable, so they are valid until they are set aside. However, the most common outcome of failing to give procedural fairness is delay because the court will not make the orders, which could result in:
   1. The deal falling over;
   2. Prejudice to one party if loan approval cannot be extended (in 2026 as house prices are falling, this is a real possibility), the asset pool may be dissipated or one party may be otherwise disadvantaged.
2. The effect of a delay in the implementation of a superannuation split will depend upon a number of factors including:
   1. Is it a percentage split? A percentage split can still be implemented, but the non-member may obtain a windfall gain by receiving the benefit of the member’s post-operative date contributions. It may be possible to negotiate a variation of the order by consent to ensure this doesn’t occur, but still allows the non-member to receive in dollar terms more than they would have received if the split had occurred in a timely fashion. The non-member would have presumably received some growth of the split had occurred and they had the entitlements in their own fund;
   2. Is it a base amount split? The usual procedures for calculating adjustments to the base amount are set out in the SIS Regs– see below – operate from the operative time;
   3. What is the operative date? Is it say 4 days after service of the order, or is it a specific date? If it is a specific date then the split will take effect from that date and the usual procedures for calculating adjustments to the base amount are set out in the SIS Regulations. If it is say 4 days after service of the order then it may be possible to negotiate for the amount to be payable to the non-member as otherwise the member will benefit unfairly from the growth in the non-member’s agreed entitlements;
   4. Did the obligation to serve the order fall on a particular party? If the obligation fell on the member, the orders may be able to be set aside under s 79A(1)(c) or s 90SN(1)(c) FLA or a financial agreement under s 90K or 90UM. If the obligation fell on the non-member then the orders cannot be set aside on the basis of their own default;
   5. Did the other lawyer check that service occurred? If not, were they negligent?
   6. Was the order with respect to a SMSF, and the SMSF has refused to implement the split? If so, enforcement orders may need to be obtained which set out the interest payable and require the trustee to implement the split. The trustee of a retail or industry fund will have processes to ensure the proper adjustment is made to the base amount – see below;
   7. If the fund does not allow the split to occur immediately, and there is therefore a delay in rolling out the non-member’s entitlement, the fund may create a separate account for the non-member which may not increase at the same rate as the member’s benefit; and
   8. Does either party have a claim against their lawyer for not ensuring that the split occurred in a timely manner?
3. The lawyers for both the member and the non-member should ensure the split occurs before ending the retainer and closing the file.
4. The amount payable to the non-member spouse from a defined benefit fund or SMSF, whether the split is delayed or occurs as expected, is calculated in accordance with regs 73-77 of the FLS Regulations.
5. The trustee is bound by the order to split payments (s 90XZD) and it has obligations under Pt 7A SIS Regs to transfer the transferable benefits. When the trustee has observed its Pt 7A obligations, any payments made to the member that would otherwise be splittable are no longer splittable payments under the terms of the order (reg 20 of the FLS Regulations).
6. The term “transferable benefits” is defined in reg 1.03(a) SIS Regulations and operates together with the definition of “adjusted base amount” also referred to in reg 1.03 SIS Regulations:

“transferable benefits, in relation to a superannuation interest that is subject to a payment split and in relation to the non-member spouse in relation to that interest, means benefits that are equal to:

(a) if the payment split is a base amount payment split and an adjusted base amount applies to the non-member spouse when the benefits are transferred – the adjusted base amount less the amount of any fees payable by the non-member spouse in respect of the payment split; or
…

adjusted base amount, in relation to a non-member spouse at a particular date, means the adjusted base amount applicable to the non-member spouse at that date worked out under Division 6.1A of the Family Law (Superannuation) Regulations 2001.”

1. Pursuant to reg 76 FLS Regulations, the interest rate for the adjustment is:

“the interest rate for the adjustment period is the rate determined by the Australian Government Actuary, and published in the Gazette, being a rate that is 2.5 percentage points above the percentage change in the original estimate of full-time adult ordinary time earnings for all persons in Australia, as published by the Australian Bureau of Statistics during the year ending with the February.”

• Therefore, the base amount will be adjusted between the operative time and the date when the payment split is made, and that adjustment will be the addition of interest.

1. As published by the Australian Government Actuary the most recent interest rates are:

• For the financial year ending on 30 June 2026, the rate is 6.9%; and
• For the financial year ending on 30 June 2026, the rate is 6.1%.

1. There are statutory obligations to be observed with time limits under Pt 7A SIS Regs.

• The request by the non-member of the transfer of the transferable benefits must usually be made before the end of 28 days after the trustee gives a payment split notice to the person (r.7A.08 SIS Regs); and
• The transfer of the transferable benefits must usually be made within 30 days of receiving the request under reg 7A.06 (r.7A.12(4)(a)(i) SIS Regs.

The following two cases illustrate the issues.

Tennant & Tennant [2018] FamCA 111

The respondent, who was the recipient of a superannuation split in a court order claimed interest on the delayed payment of the superannuation split. The respondent was entitled to a superannuation split from a self-managed superannuation fund of a base amount of $347,400.

• The applicant paid only $342,293.27. Interest on that sum at the rate of 7.5% was sought by the respondent.

The respondent also sought enforcement of the outstanding base amount of $5,106.73 and interest on that sum. Part 6 FLS Regulations (now Part 7) provides for adjustments to be made to a base amount for applicable adjustment periods. The applicable adjustment period in this case was from the operative time pursuant to the Order, i.e. four business days from the date of the 2017 Order and the day before the payment became payable.

There was no evidence before Carew J of the calculation of the base amount pursuant to Pt 6 FLS Regulations. Accordingly, it was not possible to calculate what (if any) interest should be paid. Pursuant to the orders each party was obligated to contribute equally to the costs and fees involved in giving effect to the payment split. The applicant had deducted from the payment made to the respondent certain accountant’s costs, which she contended had been incurred in giving effect to the payment split, but provided no evidence to support those amounts.

It seemed to Carew J (at [37]) that the most efficacious way of resolving the dispute “… is for the parties to retain an accountant to undertake the calculation of the base amount in accordance with Pt 6 FLS Regulations [now Pt 7] and obtain an invoice specifically for the costs and fees involved in giving effect to the payment split”, which the parties should pay equally.

Ainscrow & Gilborne [2021] FCCA 1182

There was a delay in the husband implementing a superannuation split of the SMSF in favour of the wife. He was required to pay interest to the wife of $16,935 calculated under the former reg 45D 20001 Regulations and costs of $7,539.

Tax, preservation and timing mistakes affecting settlement outcomes

• Be aware that the client may need financial planning or taxation advice.
• There are taxation consequences of superannuation splits. For example:
• The proportion of the taxable and tax-free components in the member spouse’s existing super interest is applied equally to the amount retained by the member spouse and the amount transferred the non-member spouse.
• The total superannuation balance is affected by the amount received (or lost) from the split

for the non-member spouse, this may affect their ability to contribute to superannuation in the future.

for the member spouse, this may bring the member under thresholds, allowing the member to make further contributions again.

• There are significant taxation advantages of superannuation when it is in the accumulation phase, but even more so when a condition of release has been reached:
• Earnings within superannuation are taxed at a concessional rate of up to 15%, which is often significantly lower than the client’s personal marginal tax rate
• Once a condition of release has been reached and the superannuation entitlements (unless the transfer balance cap has been reached) transferred to a retirement account or a transition to retirement income stream has commenced
• The transfer balance cap is a lifetime limit on the amount a member can transfer into one or more retirement phase accounts. The earnings on an account in retirement phase are tax free. If a party exceeds their personal transfer balance cap, they may have to:
• commute the excess into a lump sum payment or back into the accumulation phase
• pay tax on the notional earnings related to the excess.

When a retirement phase income stream is started for the first time, the member has a personal transfer balance cap equal to the general transfer balance cap at that time. The general transfer balance cap is increased (indexed) in line with the consumer price index in $100,000 increments and from 1 July 2026 is $2.1 million.

The Better Targeted Super Concessions (Division 296) came into effect for the 2026–27 financial year onwards. From 1 July 2026 individuals with a total superannuation balance above the large super balance threshold (LSBT) ($3 million for 2026–27) will be subject to Division 296 tax of an additional 15% on the proportion of earnings relating to their TSB exceeding the LSBT. In addition, on superannuation balances above the very large superannuation balance threshold (VSLBT) ($10 million for 2026–27) will be subject to an additional tax of 10% on the proportion of earnings exceeding the VLSBT.

• There are restrictions on superannuation contributions:
• Can the client contribute to make up for the funds which may be lost in a split?
• Will the client regret not seeking a split?
• Contribution caps include:
• Concessional contributions include salary sacrificed contributions, employer superannuation guarantee contributions and any superannuation guarantee charge (SGC) shortfall amounts – $32,500 pa in 2026-26
• Non-concessional contributions include contributions by the member or the employer from after tax-income if under the cap – $130,000 pa in 2026-27 if the total superannuation balance is under $2.1 million. The bring forward rule (up to 3 years) applies variously to balances under $2.1 million
• Amounts not covered by the non-concessional caps include downsizer contributions, certain personal injury payments, contributions arising from a capital gains event or a CGT look-through earnout right, or meet the requirements of either the small business 15-year exemption or the small business retirement exemption

“Caps, limits and tax on super contributions” – https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/caps-limits-and-tax-on-super-contributions

• When considering settlement options, ensure that the settlement takes account of and the client is aware of (referral to their financial planner or accountant is required for advice):
• Conditions of release;
• Retirement age;
• Preservation age;
• The client or the other party can withdraw their superannuation when any of the following apply:
• They turn 65 years old, even if they are still working;
• They reach their preservation age and choose to retire;
• They reach their preservation age, continue working, and start a transition to retirement income stream;
• They meet a condition that allows early access to their superannuation.
• Retirement means a member has ceased paid employment either:
• When they were 60 years old or over;
• Before they turned 60 years old and have reached their preservation age.
• Their superannuation fund must be satisfied you have no intention of becoming employed again in the future.
• Preservation age is the age at which a member can access their superannuation. It has been increasing from age 55 to age 60, and for everyone born after 1 July 1964 is now age 60.

See “When you can withdraw your super” – https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/super-withdrawal-options

• Capital Gains Tax (CGT) roll-over relief may be available where a trustee of a “small superannuation fund” such as a SMSF transfers assets to another complying superannuation fund when a marriage or relationship breaks down. A small superannuation fund is, from 1 July 2021, a fund with no more than 6 members, and before 1 July 2021 a fund with no more than 4 members (s 995-1(1) Income Tax Assessment Act 1997) (ITAA 1997).
• The conditions which must be satisfied to attract CGT roll-over relief are set out in Subdiv 126-D ITAA 1997.There are 3 situations where the CGT roll-over can apply.
• An interest in a small superannuation fund is subject to a payment split (under Pt VIIIB FLA), the non-member spouse serves a waiver notice (under s 90XZA FLA, formerly s 90MZA FLA) on the trustee of the small superannuation fund, and it results in an asset being transferred from that fund to another complying superannuation fund for the benefit of the non-member spouse (s 126-140(1) ITAA 1997);
• An interest in a small superannuation fund is subject to a payment split, the non-member spouse (or, in the case of an SMSF, either the member or non-member) requests in accordance with reg 7A.06 SIS Regulations that the interest is rolled over or transferred to another complying superannuation fund, and, the trustee transfers an asset to that other fund for the benefit of the non-member spouse to give effect to the payment split (s 126-140(2) ITAA 1997).
• As a result of a marriage or relationship breakdown there is a transfer of a CGT asset that reflects the personal interest of either spouse (but not both) in a small superannuation fund to another complying superannuation fund (s 126-140(2A) ITAA 1997).

1. CGT concessions may apply when transferring assets in specie between superannuation funds. Certain conditions must be satisfied in order to attract CGT roll-over relief because of marriage or relationship breakdown between funds in circumstances where each party is keeping their own entitlement. These conditions are as follows:
   1. The parties are members of an SMSF;
   2. An interest in the SMSF is subject to a payment split under the FLA;
   3. The trustee of the SMSF transfers a CGT asset to the trustee of another complying fund for the benefit of the leaving party;
   4. The transfer is in accordance with an award, order or agreement under s 126-140(2B) of the Income Tax Assessment Act 1997 (ITAA97) or under s 90XZA FLA;
   5. The transfer is in accordance with the terms of a superannuation agreement or order and the transfer is because of marriage or relationship breakdown;
   6. As a result of the transfer, the leaving party will have no entitlement in the SMSF;
   7. It may be necessary to have cross-splits to ensure that the party who remains a member of the SMSF does not incur a CGT liability as a result of the restructure; and
   8. CGT roll-over relief may also be available to payment splits where the parties are not retaining their own interests if the requirements of the FLA, especially s 90XZA, or the SIS Regulations are met.

Practical file management strategies to reduce negligence risk.

• Check references in the order to the regulations are correct.
• Is the trustee correctly named?
• Is the name of the fund correct – see www.superfundlookup.gov.au?
• Is there an appropriate identifier for the member (such as the member’s membership number or date of birth) included in the order or agreement?
• Does the order or agreement specify an operative date before the commencement of the relevant provisions of the order? May be objected to by the trustee.
• Does the order or agreement seek to split an unsplittable superannuation interest?
• Does the court order or agreement specify a base amount which is greater than the value of the member spouse’s superannuation interest in the fund?
• Is the separation declaration in an agreement complete?
• Does the order or agreement not comply with the requirements in the FLA regarding superannuation splitting? For example, it will not comply with the FLA if it:
• specifies the payment of a lump sum payment to the non-member spouse when the superannuation interest is preserved; or
• doesn’t specify a percentage split to which the non-member spouse is entitled; or
• specifies that the base amount will be paid to the non-member spouse rather than specifying that the non-member spouse will be entitled to be paid an amount calculated under Part 6 of the FLS Regulations using the base amount.
• Has the splitting order been confused with a rollover?
• Are the orders consistent with the assets owned by an SMSF?
• Is the order or agreement consistent with the trust deed/rules of the fund?
• Has the value of the superannuation interest been updated recently?
• Has procedural fairness been given to the trustee of the fund (s 90ZD FLA) in ample time to allow order to be made promptly if agreement is reached.
• Make sure the splitting of the interest actually occurs. Do not close the file without checking this.