Superannuation Splitting for De Facto Spouses in Western Australia

September 2022 Update:

Since 28 September 2022 separating de facto spouses in Western Australia have been able to “split” their respective superannuation entitlements and include the “transfer” of superannuation as part of their overall family law property settlement. 

Historically, the inability of separated de facto couples in Western Australia to split their superannuation interests frequently resulted in unfair settlements which, in practical terms, disproportionately disadvantaged the primary parent and homemaker. Other States and Territories had been able to incorporate superannuation splitting provisions into de facto settlements since 2002. The importance of the new legislation (or “scheme”) cannot therefore be overstated. 

The scheme also extends the jurisdiction of the Family Court of Western Australia to concurrently determine family law and bankruptcy matters involving de facto spouses, thereby avoiding the requirement of separate proceedings in two different Courts.

 

The New Part VIIIC Legislation 

The scheme inserts a new Part VIIIC into the Family Law Act 1975 (Cth) the benefits of which are virtually identical to those which have been available to separated married couples in Western Australia since 2002.

Who can apply?

Parties who have already commenced family law property proceedings but have not yet obtained Final Orders are able to access and take advantage of the scheme. However, parties who were already bound by Final Orders by 28 September 2022 cannot engage it retrospectively (subject to the usual exceptions for setting aside Orders made under Section 90SM of the Family Court Act 1997 (WA)). 

Where proceedings were already on foot prior to the commencement of the scheme, a party may need to amend their Application or Response to now include a superannuation “splitting order” as part of their overall suite of the Final Orders they are seeking.

 

Geographical and time limitations

In line with Section 205X of the Family Court Act 1997 (pertaining to de facto property settlements in Western Australia generally), before making a de facto superannuation splitting Order under Section 90YZB of the Family Law Act 1975, the Court must be satisfied:

1. That one or both parties to the Application were resident in Western Australia on the day on which the Application was made; and
2. That:

1. 1. Both parties have resided in Western Australia for at least one third of the duration of their de facto relationship; or
   2. Substantial contributions of the kind referred to in paragraph 205ZG(4)(a), (b) or (c) of the Family Court Act 1997 (WA) have been made in the State by the Applicant.

Time Limitations

Likewise, in accordance with the usual time limitation for instituting de facto property settlement proceedings, an Application under the new scheme must be made within 2 years of the end of the de facto relationship (i.e., the separation date), or within 12 months of the date upon which a pre-existing Financial Agreement between the de facto spouses was set aside by the Family Court.

The time limit can be extended only if:

1. Both parties’ consent; or 
2. The Court is satisfied that hardship would be caused to the Applicant if leave were not granted to hear the Application “out-of-time”. 

Although (as a matter of interpretation) the new legislation is regrettably vague as to whether an Application can be amended as of right after expiry of the 2-year limitation period (or in circumstances where neither party is currently residing in Western Australia), in practical terms there is presently nothing to suggest the Family Court has or will prevent requesting parties from doing so. 

For up-to-date, practical, and expert advice about de facto superannuation splitting in Western Australia, or family law matters generally, contact DS Family Law to arrange an initial consultation with one of our experienced Solicitors in either Perth, Midland, or Mandurah.

 

June 2020 Update: Why, what, who & when?

On 27 November 2019 the Federal Attorney General, Christian Porter, introduced to the House of Representatives the Family Law Amendment (Western Australia De Facto Superannuation Splitting and Bankruptcy) Bill 2019.

Upon the proposed legislation being enacted, separating de facto couples in Western Australia will be able to “split” their respective superannuation interests as part of their family law property settlement in the same way their married counterparts – and de facto couples in the rest of Australia – have long been able to do.

 

Why is superannuation splitting for de facto couples necessary?

The importance of the proposed changes cannot be understated. The present inability of de facto couples to split their superannuation frequently results in unfair property settlements – especially where there are few other assets – and disproportionately affects women who, on average, accumulate less superannuation due to time spent raising children and out of paid employment.

 

What will the legislation do?

Through a limited referral of power from Western Australia to the Commonwealth the proposed legislation creates a new Part VIIIC of the Family Law Act 1975 (Cth), thereby vesting power in both the Family Court and the Magistrates Court of Western Australia to make superannuation splitting orders for de facto couples. Such orders have been available to married couples since 2002.

Whilst de facto couples’ substantive property settlement proceedings will continue to be heard under the Family Court Act 1997 (WA), the Bill is drafted to ensure that superannuation splitting proceedings can be heard concurrently (and before the same Judicial Officer) thereby resolving matters quickly and cost-effectively.

The legislation also extends the jurisdiction of the Family Court of Western Australia to concurrently determine family law and bankruptcy matters involving de facto couples, thereby avoiding the requirement of separate proceedings in two different Courts.

 

Who will benefit from the changes?

De facto couples who institute property settlement proceedings in the Family Court of Western Australia prior to commencement of the new legislation will be unable to take advantage of the proposed superannuation splitting provisions unless both parties consent.

What this means is that, unless both parties to de facto property settlement proceedings choose to include their respective superannuation interests in the asset pool available for division, then those interests cannot be split. For some individuals, therefore, the decision as to when (or if) to institute property settlement proceedings may significantly affect their overall entitlements.

However, a preponderance of family law practitioners in Western Australia are of the view that requiring consent (usually of the financially stronger party) perpetuates existing inequities and runs counter to the stated purpose of the proposed legislation. Accordingly, on 24 January 2020 the Family Law Practitioners’ Association of Western Australia wrote to the relevant Committee Secretary seeking that (among other things) the legislation be amended to apply to any matter which has yet to be finally determined as at the commencement date of the new laws.

If the recommendation is adopted, the superannuation interests of all parties to property settlement proceedings currently before the Court will be available for division until such time as final Orders are made. Watch this space for further updates!

If the above recommendation is not adopted however, and the consent of both parties to de facto property settlement proceedings is required in order to split their respective superannuation interests, the following preconditions apply:

1. Any Financial Agreement in relation to the de facto relationship must have ceased to have effect without any property being distributed;
2. The choice must be in writing and be signed by both parties; and
3. Before the choice is made, each party must receive independent legal advice about the advantages and disadvantages of making the choice.
   Once the choice to include superannuation interests in the asset pool is made, it is irrevocable.

 

When will the changes take effect?

It is unclear at this juncture when the proposed legislation will commence, particularly given that both Chambers of Parliament stand adjourned on account of the COVID-19 pandemic, but the likelihood is that there will be no change to the current regime for de facto couples in Western Australia until 2021.

 

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.

 

Get Expert Advice

For further information about de facto superannuation splitting, or property settlement matters generally, call DS Family Law on (08) 9486 1766 or complete the enquiry form below to arrange an initial consultation.

The above information is general in nature and is not specific advice for your situation. If you have questions about how the information contained in this article may apply to your situation, you must seek independent legal advice.