Superannuation
Simply defined, superannuation is an enforced form of saving, so that the working members of the community can financially save funds to support themselves when they grow older.
Types of superannuation
- Defined benefit interest: Within a defined benefit interest superannuation fund, the return is based on a formula rather than by using investment return.
- Accumulated funds: Accumulated superannuation involves the time frame of which the holder is working and accumulating funds to be put into their superannuation account, which may further be affected by the holders’ own contributions, employer contributions and/or investment returns
- Self-Managed Super Fund: A self-managed superfund is a trust, which exists to build retirement benefits. The trust involves a person (individual trustee) or company (corporate trustee) to hold and build assets for the beneficiary. As with any other trust, there must be a trustee who deals with the assets of the self-managed super fund, and a Trust deed, which legally establishes the fund itself.
Reasons other than family law for release of funds
The grounds for release of superannuation funds are limited. Severe financial hardship is a ground for release often sought. The trustee must be satisfied of severe financial hardship in the following manners[1]; the holder received Commonwealth income support payments for period of 26 weeks without pause, with evidence/receipts of those payments and that the holder was unable to meet reasonable and immediate family living expenses. Alternatively, where the holder reached preservation age, plus 39 weeks and received Commonwealth income support payments for a continuous period of 39 weeks after the person reached the person’s preservation age and the holder was not gainfully employed on either a full-time or part-time basis at the time of which they reached their preservation age and were able to cash their benefits.
Unless the account holder can prove that there is some severe financial hardship that requires the release of funds, then the funds may be released where certain conditions under the fund are met. Such conditions might involve the holder reaching a certain age, entering their retirement or where medical issues arise or compassionate grounds.[2]
Family law purposes – Superannuation as an asset
For Family aw purposes, the asset pool must always remain current, due to ongoing disclosure obligations. The value is not any future value or interest. The current superannuation balance of both parties would be required to feature on the balance sheet.
The Marriage of Coghlan [2005][3]
Regarding the background of this case, the Wife had made an appeal to the outcome of her property matter, in that the trial judge erred in failing to consider the superannuation entitlements of the parties in determining the pool of property and whether correct weight was given. Indeed, no consideration had been given to the superannuation entitlements of both parties in the distribution split ordered. In this appeal, it was held by Full Court that section 79 of the FLA could be interpreted as providing the Court with discretion as to how superannuation and the parties’ interests in the fund would be distributed. Rather, superannuation is treated as interpreted under the Family law Act to be ‘another species of asset’…’which orders can also be made in proceeding for property settlement.’[4] The Full Court leaned towards the ‘two pool approach here, whereby the superannuation and assets were not to be calculated together, but rather separately. Subsequently, the Orders made by the trial judge were set aside and the appeal was allowed.
Superannuation Orders
Payment splitting
Splittable payments in relation to superannuation interest include the following: a payment to the spouse; a payment to another person for the benefit of the spouse; a payment to the legal personal representative of the spouse, after the death of the spouse; a payment to a reversionary beneficiary, after the death of the spouse; and/or a payment to the legal personal representative of a reversionary beneficiary, after the death of the reversionary beneficiary[5]. The Court may otherwise make a Splitting Order (90XS), in relation to the above eligible interests where considered fit in accordance with the legislation.
Consent Orders
Where both parties come to an agreement as to the superannuation split, Consent Orders could be made to this effect. Firstly, an Application for Consent Orders would need to be made/filed in the Federal Circuit and Family Court with the Consent Order. Such orders would not require Court attendance but would require the Chambers to consider whether the outcome/settlement is just and equitable in consideration of the asset pool of the parties.
Prior to the making of the Orders, a letter must be sent to the trustee of the trust fund, allowing the trustee procedural fairness to consider the superannuation split and Orders.
Flagging Order
A superannuation flagging order may be made by the Court on a party’s superannuation, to delay a release of funds. The trustee of the superannuation fund would have to put a flag on the superannuation, in relation to the Court Orders. The Court may make such Orders in relation to the superannuation, including that the trustee not allow split be made, and requiring the trustee to notify the member spouse and non-member spouse, of the next instance when a splitable payment becomes payable.[6]
[1] Superannuation Industry Supervision Regulations 1994 r6.01 (5)(a).
[2] Superannuation Industry Supervision Regulations 1994 r6.19A;
[3] C & C [2005] FamCA 429.
[4] C & C [2005] FamCA 429 at 40.
[5] The Family Law Act 1975 (Cth) s 90XE.
[6] The Family Law Act 1975 (Cth) s 90XU