Accumulated monetary superannuation is a major asset in addition to the house(s) and/or business requires division between warring spouses in the event of irretrievable breakdown of relationship/marriage. Interestingly though, superannuation differs from other types of property as it is held in trust and is not immediately available for use.
The law allows separating couples to value their superannuation and split the payments so agreed eighter by superannuation agreement or by the order of the court. It seems to be not mandatory, though. Couples can also make a superannuation agreement before or during their marriage or relationship about how any superannuation will be treated at the time of split. Like other property the superannuation is required to be divided on the principles of ‘just and equitable’ on the facts of the case including but not limited to the direct financial contribution by each of the party during the relationship. Provided that a superannuation agreement complies with the legal requirements, the agreement is binding. And if the agreement is binding, then the trustees of a superannuation fund are required by law to implement it; and the court is not able to make an order about the superannuation interest that is dealt within the superannuation agreement.
There are different types of superannuation including the defined benefit interest, growth-based superannuation interest, payments phased superannuation interest, partially vested accumulated interest, percentage only interest. One also requires to understand the unflaggable and unsplittable interest. The superannuation splitting legislation draws the methods of valuing most types of superannuation subject to the following exceptions including a. self-managed superannuation funds -are generally valued with the assistance of an expert like an accountant, and b. the fund approved by the Attorney- General using a different valuation method.
An eligible person can apply to the trustee of a superannuation fund for information about the superannuation interest of a member. An eligible person is (a) a member of the fund, (b). the spouse of the member, (c). if the member of spouse of the member has died, the deceased person’s legal personal representative, or (d). a person who intends to enter into a superannuation agreement with the member. The information can only be sought to either properly negotiate the superannuation agreement or in connection with family law proceedings in which the superannuation interest is likely to be considered.
A payment splitting agreement must specify an amount – known as the ‘base amount’, a method for calculating the base amount, or a percentage that is to apply to all splittable payments made in respect of the superannuation interest. However, for percentage only interests in both the growth phase and payment phase, the only agreement which can be made is to specify a percentage – hence the title ‘percentage only’ interest.
The parties are entitled to defer making a decision about the split in a superannuation interest. Such a situation is called flagging agreement which effectively prevents a trustee from making any payment out of the superannuation interest until the flag is lifted. If a superannuation interest is a defined benefit interest, it is not possible to actually value the interest until a condition of release is met and the member can know, with certainty, what a superannuation interest is actually worth the dollars amount. If a member spouse is close to the condition of release, the parties may decide that rather than agree on how to split the superannuation now, it was sensible to wait until the condition of release is met, and the actual value of the interest is known before making such a decision about the interest. Once the flagging agreement becomes operative, generally after four days of its service on trustees, it injuncts the trustee from making any payments out of the superannuation interest until the flag is lifted.
The flag can be lifted with an agreement between the parties or with the court order. It should specify the split in the superannuation interest on the basis of previous decision while making a flagging order.
The superannuation splitting carries tax implications and need to be attended to prior to finalising the agreement between the parties.
The splitting agreement becomes binding when the requirements of the splitting laws have been complied. However, the agreement is not binding unless each party obtains independent legal advice. It’s obligatory for the parties to get in touch with the legal representative and seek direction in respect of this cumbersome and highly technical process of law.