Lucy Stramandinoli* examines the minefield of calculating superannuation entitlements when relationships break down and concludes that professional advice is a must…
If your relationship breaks down, regardless of whether you are married or you have been living in a defacto relationship, depending on your circumstances, you might be entitled to some of your former partner’s super, or they may be entitled to some of yours as part of the asset split.
This is so even if one of you has not contributed to their super for many years.
Most Public Servants have “defined benefit funds”.
What this means is that their super interest is likely to have a different value to what shows on their super statement.
The main difference to other super funds is that it has a pension component which is payable for life.
During negotiations for property settlements, it is important to know what the defined benefit member spouse’s interest is worth so that you are able to work out a fair division of the assets.
There are complicated and specific formulas for how defined benefit funds are valued for family law purposes.
Depending on whether the interest is in the growth phase (where the member is still contributing to the fund); if it is in the preserved phase (because the member may have exited the public service some time ago but kept their super interest); or if the member is in the pension phase (because they have reached their preservation age).
The process to arrange a valuation of the defined benefit interest is quite straight forward. However, the complicating factor is usually what you should do with the information.
Many factors are relevant about whether a super division is appropriate and if so, what is an appropriate division.
It is not always necessary to split super if the parties agree on doing something different such as a ‘trade off’ as long as it is a fair outcome for the parties.
If the member spouse is in receipt of an invalidity defined benefit pension, such as former military officers, splitting this interest can be very difficult to achieve as the Court can treat invalidity pensions as income and not super, especially if the invalidity is permanent.
The case of Campbell v Superannuation Complaints Tribunal [2016] FCA 808 (a case involving a Military Super member in receipt of an invalidity pension) demonstrates how complicated this can be.
If the member is in receipt of an age pension from their super interest parties need to be careful not to double count this interest as income of the member and then count the family law lump sum value amount as well.
Whilst the pension is often capable of being split, there may be tax implications on the other spouse to do that if they are not yet of preservation age.
If you are going through a separation or you are thinking about separating, it is always a good idea to get expert advice so that you know what your options are.
Neilan Stramandinoli Family Law specialise in family separations. We can tell you what your options are in relation to splitting your super.
* Lucy Stramandinoli is a Director of Canberra-based family law firm NS Family Law. She can be contacted at [email protected].
