De Facto Superannuation Splitting in Western Australia
It might come as a surprise to many but currently, in Western Australia, superannuation is not considered an asset for the purpose of a property division between de facto couples following a separation.
This means that, unlike in any other Australian state or territory, superannuation cannot be split or transferred between de facto spouses living in WA and is taken into account as a financial resource only.
This is also in contrast to the law relating to married couples, which states that superannuation is considered property and as such provides provision for married spouses to split their super as part of a property settlement.
As a result, you may be at a disadvantage when separating after a de facto relationship in WA.
Legislative amendments are in train to allow separating WA de facto couples to split super, but it may still take a while for these changes to come into effect.
What is super splitting?
Superannuation splitting is the process of transferring superannuation interests from one party’s superannuation fund to the other’s superannuation fund. Contrary to popular belief, however, it does not convert the superannuation interest into cash and superannuation laws with respect to accessing superannuation entitlements still apply.
There are many different types of superannuation funds and interests in Australia. For example, accumulation, defined benefit, untaxed and self-managed superannuation funds. As part of the negotiation process, parties will be required to disclose the nature of their superannuation interests and in some circumstances, specialist advice may need to be obtained to value those interests.
An eligible person can seek information from the Trustee of a superannuation fund about a superannuation interest. An eligible person includes:
a) The member;
b) If the member has died, their legal personal representative;
c) The spouse (legal or de facto, same sex or opposite sex) of the member;
d) If the spouse has died, the spouse’s legal personal representative; or
e) A person who intends to enter into a superannuation agreement with a member.
An application to the Trustee for information about the member’s superannuation interest can be made using the Superannuation Information Request Form and must be accompanied by a Form 6 Declaration. Both documents are available at the Family Court of Western Australia and the Family Court of Australia websites.
The process of superannuation splitting often ensures that a fair and equitable split of the assets is attained. To enable a superannuation split to occur, parties must obtain Orders from the Family Court or enter into a Financial Agreement setting out the agreement. The Trustee of the relevant superannuation fund must, however, first be provided with procedural fairness and consent to the proposed superannuation split. Superannuation is then transferred between super funds, which can provide a significant boost to one party’s retirement savings.
Having regard to the fact that there are varying types of superannuation funds in Australia, it is always prudent to obtain specialist financial advice when negotiating a financial settlement that may involve splitting of superannuation so there are no unforeseen taxation or other consequences.
Are de facto couples in WA disadvantaged?
The practical effect of the current de facto law in Western Australia is that a large number of people in de facto relationships going through a financial settlement may be disadvantaged, particularly where superannuation forms the main asset, or one of the main assets, of the relationship.
A common scenario where one party may be disadvantaged is when they have taken time out of the workforce to care for a child and sacrificed their career advancement, and thus superannuation contributions and growth, as a result. In the overwhelming majority of cases, this scenario applies to the mother. Further, as it stands, the statistics show that women already retire, on average, with almost half of the superannuation of their male colleagues.
So how does the Family Court deal with this scenario? An assessment will be made of other assets available to be divided between the parties and the Court may look to provide an adjustment in favour of the party who has significantly less superannuation.
However, the problem lies in situations where there are little to no other assets that can be considered. Depending on the unique circumstances of the case, a party may then seek to apply to adjourn proceedings for a property settlement on the basis that there will be a “significant change of circumstances” in respect of the financial circumstances of either party in the future, such as when the superannuation becomes payable and can be accessed. However, this is wholly discretionary – see section 205ZG (5), (a) and (b) of the Family Court Act 1997 (WA). Alarmingly, if superannuation is the only asset of the relationship, it may well transpire that one party may have to simply “walk away” from a property settlement that they otherwise might have been entitled to if they were married.
The Australian Bureau of Statistics has recently released figures showing that de facto relationships are on the rise. Australians are marrying later in life, or deciding not to marry at all. For Western Australians, this can mean significant and unforeseen consequences in the unfortunate event of a relationship breakdown.
Western Australia has unfortunately been lagging behind the rest of the country with respect to the splitting of de facto superannuation interests. In all other jurisdictions in Australia, de facto couples are permitted to split their superannuation as part of a property settlement and as such, it is an asset that forms part of the asset pool available for division. This has been the case since 2009 when federal legislation was implemented in relation to de facto couples.
So why is Western Australia the odd one out when it comes to de facto superannuation splitting?
Well, it’s actually quite complex. Western Australia was the only state in Australia that decided against referring their powers to the Commonwealth to deal with de facto relationship matters. What this means is that the Western Australian government has retained power to make laws about de facto couples. However, the significant downside to this is that the State Government does not have the power to make laws about superannuation splitting. That power is reserved for the Commonwealth Government. So when the 2009 legislative amendments for de-facto superannuation splitting were introduced by the Commonwealth Government, they were not applicable in Western Australia, but applied in all other jurisdictions in Australia.
When is the law changing in WA?
On 25 October 2018, Federal Attorney General, Christian Porter, announced that the Commonwealth Government agreed with the State Government to introduce legislation to allow de facto couples in WA to finally split their superannuation entitlements. This ends a decade-old stalemate with the WA Government.
In the media release issued by the Attorney-General’s office, it was stated that the Government will accept the limited referral provided by WA to ensure superannuation can be split, while all other aspects of property division will be kept within WA state law.
The necessary legislative amendments will be dealt with throughout 2019, with the laws to likely come into effect in early 2020. That said, an impending Federal Election likely to take place in May of this year might see such legislation further delayed. However, as with the 2009 legislative amendments across the rest of the country, the new laws won’t be retrospective. This means that it is likely the new laws will only apply to separations that occur after the laws come into effect.
The implications of the new laws are significant and will mean that WA de facto couples going through a separation will be treated fairly and consistently in line with the rest of the country. The impending amendments to the legislation have been very much welcomed by the Family Law community in WA.
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