When a marriage or de facto relationship breaks down the Family Law Act allows superannuation to be divided.
The Family Law Act treats superannuation differently from other types of property. It lets separating couples value their superannuation and split superannuation payments. Superannuation splitting does not convert superannuation into cash. The superannuation is still subject to superannuation laws and is usually unable to be accessed until retirement age is reached)
Superannuation can be split either by:
- an order of the Family Court
- a superannuation agreement (an agreement that deals with a superannuation interest).
Types of super funds
There are three types of superannuation interests, accumulation funds, self-managed superannuation funds and defined benefit funds. Most superannuation funds are accumulation funds.
In an accumulation fund the value of the members interest depends on the money that the member and their employers contribute, and on the investment return generated by the fund.
Self-managed superannuation funds (SMSFs).
The difference between a SMSF and other types of funds is that the members of a SMSF are usually also the trustees. This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws.
Defined benefit funds
In a defined benefit fund, your retirement benefit is determined by a formula instead of being based on investment return.
Most defined benefit funds are corporate or public sector funds. Many are now closed to new members.
Typically, your benefit is calculated using:
- the money put in by you and your employer
- your average salary over the last few years before you retire
- the number of years you worked for your employer
Valuing superannuation can be straight forward or complex. Accumulation interests can be valued by simply obtaining a recent member's statement The value of a self managed superannuation fund depends upon the value of the assets owned by the fund, such as shares or real estate. Defined benefit funds are more difficult to value. Where the member’s interest is in the payment phase and the member is in receipt of a pension, the non-member’s separate interest will be payable from the operative time in the form of an indexed pension. Where the member’s interest is in the growth phase the non-member will receive either a base (dollar) amount to be transferred to the non-member spouse which will require the actuarial valuation of the interest of the member or a splitting percentage of the member’s benefit to be transferred.