“My ex has never worked, why should they get half my super?”
Valuing Different Types of Superannuation in Family Law
The most common type of superannuation is held in accumulation interest funds. The value of this type of superannuation interest is easier to identify than other superannuation interest types, being made up of employer and/or employee contributions and returns on investments, less any fees or expenses incurred in running the fund. A recent member statement and/or completed Superannuation Information Form is usually sufficient to value an accumulation superannuation interest for Family Law purposes.
Defined Benefit Funds
While not as common, defined benefit superannuation interests are less transparent than interests held in accumulation funds. As such, when valuing a defined benefit superannuation interest, a member will be required to send a Form 6 or Superannuation Information Request Form to a superannuation fund or expert to have an interest valued as at a specific date.
While defined benefit formulas vary from fund to fund, they are usually based on a combination of factors such as:
- A member’s average salary leading up to retirement or the value of the super at retirement
- How long a member has worked for their employer
- The age of the member
Self-Managed Super Funds
Another less common type of superannuation interest is those held in self-managed superannuation funds (SMSF). Unlike other types of superannuation, the diverse nature of SMSFs makes it impossible to prescribe a standard valuation regime, as exists for other types of superannuation. As such, SMSFs are usually valued with the assistance of an expert.
Super Splitting in Family Law Property Settlements
In Family Law, the division of superannuation occurs by way of a Superannuation Splitting Order or Agreement. Generally, the result is that the trustee of a superannuation fund will cause payments to be made to a non-member spouse from a percentage of the member spouse’s superannuation interest, or alternatively based on a specific fixed base amount. A Splitting Order will not convert the superannuation to cash: it is still subject to superannuation laws such as it not being able to be accessed until retirement.
Distinguishing Superannuation from other types of Property
The Full Court in Coghlan & Coghlan (2005) FLC 93-220 held that “superannuation interests are another species of asset”. This case provides authority for the treatment of superannuation separately from other property in Family Law property settlements. This is known as the “two pools approach” and allows the direct and indirect contributions each party has made to the superannuation pool to be given proper consideration. The two pools approach also enables the distinct nature of superannuation interests to be taken into account.
However, while this case gave preference to the two pools approach, it noted that there is nothing to prevent a Court, in the exercise of its discretion, from including superannuation within the larger asset pool and taking a global approach to the division of property.
The primary thing to remember is that there are no hard and fast rules when it comes to the division of superannuation in Family Law matters, and each case is based on its individual circumstances.
There is no automatic 50/50 split of superannuation, nor is a spouse who has solely contributed to the superannuation automatically entitled to retain 100%.
Superannuation Accrued Pre and Post Separation
The contributions made to the accrual of superannuation and the future needs of the parties are essential considerations in determining what would be a just and equitable division of superannuation assets.
Historically, the position was that if one party entered a relationship with significant assets, their entitlement to solely retain these assets eroded with the length of the relationship. This is referred to as ‘the erosion principle’ (In the Marriage of Money (1994) 17 Fam LR 814). In more recent times however, the Family Court has moved away from strictly applying this principle when it comes to superannuation interests.
In Pierce & Pierce  FamCA 74  the Full Court held that it is not so much a matter of ‘erosion’ of contribution, but what weight should be given to the initial contribution, against all other relevant contributions of both parties in determining what would be a just and equitable division.
The case of Palmer and Palmer  FamCAFC 159 involved circumstances where the Husband entered the relationship with significant superannuation. In this case, the Full Court quarantined the pre-relationship superannuation from the value of the Husband’s superannuation interests at the time of the Hearing. The value of the Husband’s superannuation at the date of cohabitation was deducted from his final entitlement, and the balance was then divided equally between the parties.
For superannuation that has accrued significantly post separation, when assessing contributions, Courts usually offset any parenting contributions post separation against any contributions by the primary income earner to the value of the superannuation after separation (Spiteri and Spiteri (2005) FLC 93-214). However this does not mean that the weight of the contributions of the parties as assessed during the relationship will carry over to the period post separation.
For example, the parties in Ilett and Ilett (2005) FLC 93-221 had been separated for 8 ½ years at the time of the Trial. The Full Court held that the parties’ contributions up to the date of separation were equal, however that post separation the Husband’s contributions were greater and took this into consideration when making the overall percentage adjustment.
There are varying approaches with respect to valuing and determining the division of superannuation assets in Family Law matters. While the case law does set out principles that apply when considering divisions of superannuation, each case is still approached and determined based on its own specific circumstances.
How we can help
Our Accredited Specialist, Vicki Kelly and the Family Law Team have extensive experience with helping many clients through family law property matters, involving all types of superannuation. If you would like further information, please contact:
Vicki Kelly on firstname.lastname@example.org
Emma Shuttleworth on email@example.com