Section 79(1)(a) of the Family Law Act provides for the court to make orders “with respect to the property of the parties to the marriage or either of them – altering the interests of the parties to the marriage in the property”.
It follows that, in most family law matters, each of the parties’ superannuation entitlements can form the subject of an order altering the interests of the parties to the marriage or be taken into account when making such orders.
In December 2002, specific amendments providing for the splitting of superannuation entitlements under family law became effective.
In the case of an accumulation entitlement (the most common form of superannuation in Australia), a value can usually be ascribed to the entitlement by obtaining an up-to-date statement from the trustees of the fund.
In the case of a defined-benefit superannuation entitlement, figures on statements can differ substantially from the value calculated under the court’s regulations. The pension or lump-sum value of a defined-benefit superannuation entitlement is usually calculated as a function of final salary and a specified multiple. If you have such an entitlement, you will probably be used to hearing about the multiple at your workplace or will have seen references to it on statements.
Valuation methodologies for defined-benefit superannuation interests (including pensions) are set out in the schedules to the Family Law (Superannuation) Regulations. While Regulation 29 says “If the whole of the superannuation interest is a defined benefit interest, the gross value at the relevant date of the interest is to be determined in accordance with this regulation”, the court is not necessarily bound to adopt such a value (see, for instance, Edwards  FamCAFC 139).
A number of issues can arise in relation to self-managed superannuation funds (SMSFs). Issues may relate to compliance (questions about whether funds comply with relevant superannuation requirements); may arise as a result of the potential for conflict between an individual’s interests as a member of a fund, as a party to a family law matter and/or as a trustee of a fund (or as director of a trustee company); or can also arise where some assets of a fund may be subject to accrued capital gains tax liabilities or potential stamp duty liabilities. There may be other issues. Parties may need to be careful when dealing with SMSFs under family law and may need to obtain specialist advice.
- Defined-benefit entitlements
- Flagging orders
Section 90MD of the Family Law Act says “’flagging order’ means an order mentioned in subsection 90MU(1)”.
A flagging order might be made in circumstances where superannuation forms a large proportion of the net assets of a separating couple and the court (or the parties by consent) determines that property proceedings (or some part of them) should be adjourned until the relevant superannuation entitlement becomes accessible. The order acts to prevent any dealing with the entitlement in the meantime (without the court receiving notice).
- Self-managed super funds
- Super splitting