Superannuation and Family Law

In this video, Page Provan Managing Director and Accredited Family Law Specialist, Bruce Provan, talks about the treatment of Superannuation in Family Law property settlements.

Good morning, my name’s Bruce Provan I’m the Managing Director of Page Provan, a law firm in Brisbane which specialises in family and fertility law. I wanted to talk to you today about the treatment of superannuation in family law property settlements.

In other words, there’s been a separation and a couple wanted to divide up their property and as is usually the case, there’s some superannuation there and the question of how that gets divided. Now, in a property settlement, superannuation doesn’t have to be split.

In other words, each party can keep their own superannuation, and that’s very often what happens. But for a number of years now, parties have been able to agree or courts have been able to order a split of superannuation, which means that part of the superannuation interest of one of the parties is split or taken off their superannuation and put into a superannuation policy of the other person.

Now, most of the time it’s fairly straightforward. There’s different sorts of superannuation funds, and most commonly there are accumulation funds, which is just your ordinary superannuation fund where part of your wage goes into and you might contribute on top of that.

So it’s an accumulation fund, they’re fairly easy to value. You get a valuation six monthly or annually that tells you what it is, and you can go online and find out what it is worth at that time, and that’s generally straightforward. So if we’re dividing accumulation funds, there’s usually not too much difficulty doing that.

What does become more difficult is if the superannuation is in what they call a defined benefit fund or a self managed fund. Now, a defined benefit fund is different in that the valuation of the superannuation depends on a number of factors, including what they call a final average salary. Now, these funds are particularly common for public servants and employees in big corporations, but they’re becoming less common.

Now, in valuing a defined benefit fund, it’s not simply a case of looking at the valuation online to work out what it’s worth. With most of the funds, there are complex formulas to work out what the fund is actually worth, and often what happens is that we would engage an expert to apply that formula to tell us what the superannuation fund is worth based on the formula, and that leads us in our negotiations.

The other superannuation funds that can be complex are self-managed funds, and that’s where people set up their own superannuation funds, it’s generally just two parties. It can be more, and the self-managed fund can invest in all sorts of investments. Often they invest in property, either residential or commercial property.

The funds are usually established with the assistance of an accountant, and they’re required to be audited every year. So valuing those can be complex because the case of working out exactly what assets are in the fund and having them valued. So, for example, if there’s real estate or business in the fund, that would have to be valued.

Now, once that happens, there has to be an allocation of each member’s, what they call member benefit and that usually requires the assistance of an accountant to work out the benefit of each of the parties in the fund, and with that information, there can be a split of superannuation between the parties.

But where it becomes complex is if there’s not enough liquid funds in the superannuation fund to do that easily. So for example, if there’s a self-managed superannuation fund and a big part of that fund is in property, it’s a question of whether there’s enough other liquid assets so that the person who wants to roll their interest out of the fund can take their interest from those liquid assets or sometimes the property needs to be sold, and once the property is sold, the net proceeds of sale go into calculate what that fund is worth.

Now, with the self-managed funds, what generally happens is that one person maintains their interest in the self-managed fund. There’s a super split, and then the other person rolls their superannuation interest out of that fund into either another self-managed fund or another fund of their choosing.

So having those funds valued and working out what the split is going to be usually requires assistance of the party’s accountants and or financial advisors to do that. It can be done, it’s not a problem, but it’s just a bit more complicated. So that’s how superannuation is divided up in property settlement.

It always features as part of the negotiation. Superannuation is treated as what they call property, but treated similar to an asset. In court proceedings, the court will sometimes put the superannuation into what they call a separate pool. In other words, they will treat superannuation differently to other property, I hope that assists you.

My name is Bruce Provan, Managing Director of Page Provan Family and Fertility Lawyers. If we can assist you with the property settlement, please contact us.