Superannuation is treated as a type of property interest under the Family Law Act 1975.
The Act stipulates that, in proceedings for property settlement, the Court may make orders in relation to superannuation interests of the parties. This applies whether the parties were married or in a de facto relationship.
The first step is to determine the type of the superannuation interest. It is important to know the type of the superannuation interest as different valuation methods apply to different interests. Superannuation interests generally fall into one of the following categories:
- Accumulation interest
- Defined benefit interest
- Self-managed fund
- Partially vested accumulation interest
- Percentage only interests
- Retirement savings account (RSA)
- Approved deposits
- Superannuation annuities
- Small superannuation investments.
Most superannuation entitlements can be split by an order of the Federal Circuit Court of Australia or Family Court of Australia, or a Binding Financial Agreement.
Before orders can be made for your superannuation interest to be split, the Court must have the value of the interest. The Court must value the interest according to the mandatory methods prescribed by the Family Law (Superannuation) Regulations 2001 (Cth). The most common and efficient way to get a valuation is for an eligible person, being the member of the spouse of the member, to submit to the trustee of the superannuation fund a Form 6 Declaration by Applicant for Information about a Superannuation Interest and Superannuation Information Request Form. After receiving these documents, the trustee will provide the requested information. Some trustees charge a fee to comply with the request.
It is also important that the trustee of the superannuation fund is given notice of the proposed splitting orders so that the trustee has the opportunity to object. The trustee is a third party proposed to be bound by the splitting orders and therefore needs to be afforded procedural fairness. The Court cannot make a superannuation splitting order that will be binding on the trustee of the superannuation fund until the trustee has been provided with procedural fairness. The party who is receiving the benefit of the proposed superannuation splitting orders is typically responsible for providing the trustee with both the proposed orders and the sealed orders once they are made.
After a splitting order has been made by the Court, the superannuation that is to be split will typically either be rolled into the spouse’s existing superannuation fund as a lump sum, or paid to a new superannuation fund of their choosing.
The Court can also make a flagging order in relation to a superannuation interest. A flagging order prevents the trustee of the superannuation fund from dealing with the superannuation interest until the flag is lifted. Flagging orders are useful when the value of the superannuation interest is uncertain bit will be determined within a period of time. The flagging order requires the trustee to notify the court when the flagged superannuation interest becomes payable and enables the Court to make an order that the flag be lifted and a splitting order be made.