Whether you are an employee or an employer, one of the main concerns about life nowadays is superannuation. We are constantly being reminded by financial advisors that baby boomers need to look after themselves when they retire. The news gets even bleaker when you consider how a marriage break up affects your superannuation.
With the new Family Law Legislation Amendment (Superannuation) Act 2001 introduced in December 2002, superannuation can now be split when marriages break down thus affecting the final split of marital assets. This newsletter will hopefully provide a better insight into superannuation splitting.
A new section called, Part VIIIB has been introduced into the Family Law Act 1975. The new section sets out the rules for making superannuation splitting agreements and orders.
A person’s superannuation can be divided in any proportion between the husband and spouse in the event of separation. Superannuation splitting takes place through an agreement or court order.
The old super laws prevented superannuation splitting because super was treated as a financial resource rather than property capable of immediate distribution. Superannuation funds as financial resource can be taken into account when the final order is made for distribution of matrimonial assets. However the new provisions allows superannuation to be treated as property in the event of separation, thereby paving the way for superannuation splitting.
Mr and Mrs Bloggs are recently separated. Mr Bloggs is the sole income earner of the family. Their total asset pool is $100,000. There is also a Super fund in Mr Bloggs’s name that has built up over the years to $50,000. Under the old superannuation laws, in the event of a court order for a 50%/50% split (or $75,000 each) the court may order that Mr Bloggs retain $25,000 of the property assets and keep the superannuation valued at $50,000. The court may order that Mrs Bloggs retain $75,000 and receive none of the superannuation resource.
Why? Because existing laws could not split Mr Blogg’s super but could take it into account. However as a person is prevented from accessing their super before a minimum age, the notional value of Mr Bloggs super fund may not be as attractive to him as being given a cash sum immediately at settlement.
As a result of the change in super laws, an order could be made in the family Court for Mr and Mrs Bloggs to each retain $50,000 of the assets and $25,000 of the super. Both parties still cannot use their the super fund until 65 but at least in the meantime they will have equal assets to use.
Do the new laws apply to you?
You are able to have a super split if:
- you were ever married and divorced; or
- Currently married but separating; and
- Still finalising property arrangements either through a court order or binding financial agreement.
The current laws are retrospective which means that it affects previous divorces as well as current separations. However the laws only apply to divorces that have yet to finalise property agreements.
That means if you have a court order or financial agreement dividing property before 28 December 2002 then these superannuation splitting laws won’t apply to you. If after this date you are still finalising property arrangements or have an informal arrangement then superannuation splitting laws will apply to you.
The new defacto relationship laws in Western Australia have changed the way joint assets are shared in a defacto relationship split (the subject of a previous newsletter). However superannuation splitting laws DO NOT apply to de facto relationships.
The reason for this is that under the Australian Constitution, the Commonwealth does not have the power to legislate for de facto couples, only to married couples. Although the Commonwealth has asked the States to legislate on this issue, it has yet to be done.
What does Superannuation Splitting Laws Affect?
Generally the laws cover most superannuation entitlements. There are some “superannuation-like” products that are not subject to this law.
Further superannuation interests that have a withdrawal benefit of less than $5,000 is not able to be the subject of a split for the simple reason that it would just not be cost effective.
The new laws allows a more flexible way for couples to deal with the splitting of their matrimonial assets and resources. Some spouses may prefer to keep their super after a break up as the super fund is more valuable to them if it is retained till retirement age. Some spouses may feel that the value of a super fund is limited and would prefer to split their cash and super assets immediately. The new rules allow more options in dealing with getting the parties to agree on an already difficult issue of property settlement.
On the Light Side…
These are from a book called Disorder in the Court, and are things people actually said in court, word for word, taken down and now published by court reporters who had the torment of staying calm while these exchanges were actually taking place. Some of these are excellent stuff! Don’t miss the last one!!!
Q: Are you sexually active?
A: No, I just lie there.
Q: What gear were you in at the moment of the impact?
A: Gucci sweats and Reeboks.
Q: This myasthenia gravis, does it affect your memory at all?
Q: And in what ways does it affect your memory?
A: I forget.
Q: You forget. Can you give us an example of something that you’ve forgotten?
Q: What was the first thing your husband said to you when he woke up that morning?
A: He said, “Where am I, Cathy?”
Q: And why did that upset you?
A: My name is Susan.
Q: Now doctor, isn’t it true that when a person dies in his sleep, he doesn’t know about it until the next morning?
Q: The youngest son, the twenty-year-old, how old is he?
Q: Were you present when your picture was taken?
Q: She had three children, right?
Q: How many were boys?
Q: Were there any girls?
Q: Doctor, how many autopsies have you performed on dead people?
A: All my autopsies are performed on dead people.
Q: Doctor, before you performed the autopsy, did you check for a pulse?
Q: Did you check for blood pressure?
Q: Did you check for breathing?
Q: So, then it is possible that the patient was alive when you began the autopsy?
Q: How can you be so sure, Doctor?
A: Because his brain was sitting on my desk in a jar.
Q: But could the patient have still been alive, nevertheless?
A: Yes, it is possible that he could have been alive and practising law somewhere!