Superannuation splitting in family law cases just got a lot easier. Or did it....?
Superannuation splitting has traditionally been an area of family law which is unnecessarily complex and lacked transparency. Recent changes requiring the ATO to produce details of the superannuation held by your former spouse are an important and helpful improvement, but there is still much more than can be done to make superannuation splitting easier more cost-effective.
How does family law superannuation splitting work?
Superannuation splitting allows a portion of your spouse’s superannuation to be transferred to a super account in your name, as part of a property settlement following the end of a marriage or de facto relationship. In most cases, it becomes part of your superannuation and is subject to the same conditions as your existing super, preserved until retirement unless you qualify for an early release.
The first step in the process of superannuation splitting is to obtain a valuation of your ex’s super accounts. Once that is done, you can negotiate an amount to be split, draft orders, send them to the super fund to approve, and then lodge them with the Federal Circuit and Family Court.
Sounds simple. It should be. But it isn’t.
What are the problems with super splitting?
The first is find out the value of your ex’s superannuation.
This is, in theory, easy enough to do if you know the details of their super fund. There is a form to be completed and sent to the fund with payment.
In practice, it’s not that simple. Often you don’t know the details of your ex’s superannuation fund, or they may have multiple funds, and you simply have no knowledge of them.
Another problem is that, whilst some super funds provide a simplified one-page form to be completed and sent to them, others do not. This then requires the superannuation information kit published by the Federal Circuit and Family Court of Australia to be used. Whilst lawyers know how to complete this form, it is very easy to get wrong (even just when you are signing it!). The fund then sends it back, causing delays.
Different super funds also charge different amounts to provide the information, and some require payment by cheque or money order, increasing the difficulty in easily obtaining information.
Once the information is obtained, there is even then a rigmarole required when asking the super fund to approve the superannuation splitting order. Whilst some funds publish a sample order on their website, in a recent matter even when we used the sample order, the fund requested that changes be made.
Superannuation funds are entitled to be provided with what is referred to as “procedural fairness”, giving them an opportunity to be heard about the wording of orders. Every fund has slightly different preferred wording and in the absence of them providing an approved form of orders, you are essentially guessing whether the super fund will accept your superannuation splitting orders.
When you are trying to reach a family law property settlement agreement without spending a lot of time or money, this can be extremely frustrating.
We have recently been dealing with one particular fund (names excluded to protect the guilty) which has provided different information from different members of the team, and conflicting information on different matters where we are dealing with the same fund.
Superannuation funds do not make it easy to contact them and, being allowed 28 days to respond, they will frequently use up that time to come back saying that a minor further detail is required before they can consider the orders when that request could have been made much earlier.
Another difficulty that is encountered with superannuation splitting is funds expecting to be provided with the exact amount of the super split. Whilst there are some circumstances when this is required, it is not a blanket requirement under the legislation or the Federal Circuit and Family Court Rules.
If you are in mediation, with an upcoming court date, trying to reach a property settlement agreement, it’s incredibly frustrating to reach an agreement about a super split in the hope of your court case being finalised only to then have to wait up to another 28 days for the fund to approve the orders. If they then request changes, the delay cycle continues
Positive changes have been made but more needs to be done
One of the primary difficulties identified above was the difficulty in you obtaining information about your ex’s superannuation accounts.
Recent changes to the law mean that the Federal Circuit and Family Court can order the ATO to provide your former spouse’s super information.
Whilst many lawyers are talking about what a positive change this is – and it is definitely a good thing – what people don’t seem to be talking about so much is the one way this change really falls short and does not do enough to provide superannuation transparency in family law matters.
To obtain the information requires there to be court proceedings taking place. Given that you, along with most people, probably want to divorce without court, this change to the law does not do enough.
This change also doesn’t make sense where you cannot commence court proceedings without making genuine steps to resolve your dispute, but cannot make those genuine steps if you don’t have transparency of your ex’s superannuation accounts.
What is the answer to provide real transparency with family law superannuation?
The disclosure of superannuation needs to be taken further, so that you do not have to incur the stress and expense of commencing court proceedings before obtaining information about your ex’s super.
Instead, it should be a requirement as part of the disclosure process that parties produce a copy of their myGov ATO account listing all of their superannuation balances as at the end of the previous financial year. This gives you a listing of all funds at that point in time and is a good stepping-off point for you to find out the value of your ex’s super and make sure you know about all their accounts. It’s certainly a document that we request as a matter of course when we are representing a party.
Failure to provide that myGOV document, resulting in an inability to take genuine steps to resolve the matter, should result in punitive costs orders against a party for the costs incurred by their failure to produce that easily obtainable document.
A step further would be to extend the capacity of the ATO to provide superannuation to a spouse without the necessity of a Court Order. No doubt, there are privacy issues involved, but those should not be insurmountable (particularly when you can already ask for a value from the super fund as soon as you know which ones to ask).
Super splitting complexity must be reduced
The complexity of obtaining approval for superannuation splitting orders could also be overhauled. The simpler super splitting initiative is designed to make super splitting far more straightforward. There are some funds taking place in a pilot program to implement this, but it has been discussed since, at least, December 2019, when HESTA promoted the concept.
We certainly hope that initiatives like these will make the superannuation splitting process far easier to navigate and result in lower costs to family law clients.
If you are having difficulty accessing information about your former partner’s superannuation, please contact one of our team of family lawyers.
The information in this article is general information only, not legal advice. Contact us to obtain advice about your specific situation.