Superannuation and Property Settlement

The family courts have power to divide payments made or to be made from a superannuation interest, between parties to a former relationship (called a “splitting order”) or to make an order which in effect restrains a trustee of a superannuation fund from paying out a party’s interest in superannuation or which precludes that party receiving his or her interest, pending further order of the Court (known as a “flagging order”).

The court cannot make orders of that kind though if the superannuation interest is “not splittable” or “not flaggable”. Payments that are not splittable payments include certain payments made on compassionate grounds (for example to treat a life threatening illness or a payment made to a member because of severe financial hardship).  An unflaggable payment will often be a pension.

In the past, superannuation was treated as a financial resource of the parties to a former relationship and not an asset as such. This was because the superannuation interest did not actually become a real asset until the interest vested on the retirement of the person entitled to the superannuation.  However, this could cause difficulties for a party in a family law property settlement, particularly where the superannuation formed a significant part of the asset pool that was available to be divided between the parties.

Today, however, the court has power to deal with a superannuation interest as though it is “property”.

Whether you and your former partner are involved in court proceedings or wishing to obtain consent orders (without actually going to court), in an appropriate case, an order may be obtained which effectively gives one party an interest in the other party’s superannuation.

Orders providing for a payment split of superannuation in favour of one party to a former relationship can be binding on the trustee of the superannuation fund so long as the trustee has been afforded what is known as “procedural fairness”. This involves ensuring that certain items are addressed, including ensuring that the trustee is given the appropriate period of notice of the intended orders.

There are different types of splitting orders that can be made. The most common method of splitting is the “base amount” approach. This is an order that gives the non-member partner an entitlement to be paid an amount (called the “base amount”) calculated in accordance with the regulations and there is a corresponding reduction in the entitlement of the member.

Where a splitting order is made, many funds have rules which allow the non-member spouse to have their interest in the superannuation rolled over into their own fund.

It is also important to consider whether you have grounds to obtain a splitting order or a flagging order. See our other blogs following on that area.

If you would like advice concerning how you may access part of your former partner’s superannuation as part of your property settlement, contact us and we will be happy to assist you.