Since 1992 superannuation contributions in Australia are partly compulsory and partly voluntary, encouraged by tax benefits. Employers are obliged to make superannuation contributions for their employees in addition to their wages and salaries. Currently the employer contribution rate is 9.5% of the employee’s salary with a planned increase to 12% in 2025. People are also encouraged to supplement compulsory superannuation contributions with voluntary contributions, either under salary sacrifice arrangements (pre-tax) or personal contributions (after-tax).

Payments towards a person’s retirement must be made into a superannuation fund which essentially is a special form of trust governed by its trust deed (the superannuation fund deed) and managed by its trustees. The trustee/s owe fiduciary obligations to the members of the superannuation fund and are similar to the obligations that any trust owes to its beneficiaries. The superannuation fund is required to invest the contributions received for the benefit of its members.

Superannuation funds differ from other forms of trusts in one very important respect: they must comply with numerous regulatory and reporting obligations specific to them. Management of superannuation funds is highly regulated by the Superannuation Industry (Supervision) Act 1993 (SIS) (Cth) and related legislation which prevents access to benefits until retirement age is reached. This reflects government policy that the role of superannuation is to provide for members through the payment of pension income and the payment of death benefits, once members have retired.

As a consequence of the compulsory nature of superannuation payments, superannuation has become a significant element in any property settlement adjustment under s 79 FLA between separating de facto or married parties. However because of the strict regulatory nature applied to superannuation fund trustees, practitioners must ensure they give adequate notice to fund trustees before applying for any splitting order of existing benefits.

Is superannuation property?

The legal status of superannuation as property has been clarified under s 90XC FLA which extends the s 4 definition of a "superannuation interest" as referring to an interest that a person has as a member of an eligible superannuation plan, but does not include a reversionary interest.

However, because it is held in a trust, superannuation is differently treated as property under the Family Law Act 1975 (Cth). When a marriage or de facto relationship breaks down property can be divided between the parties under s 79 of the Family Law Act 1975 (Cth), that is their property interests can be altered. For more on how superannuation is treated in a property settlement, see also Identifying property and liabilities.

Superannuation interests can be altered either by:

• • an order of the Family Court or Federal Circuit Court; or
• • the parties making a superannuation agreement (a financial agreement that deals with a superannuation interest).

Part VIIIB of the Family Law Act 1975 (Cth) enables a court to alter the superannuation interests of spouses (including de facto spouses) and provides the framework for a court to make orders to distribute superannuation interests of the parties as well as the structure of superannuation agreements.

The Family Law (Superannuation) Regulations 2001 (Cth) sets out:

• • the methods of valuing superannuation interests;
• • the way in which the payment split is to be put into effect; and
• • the information that the trustees have to provide.

Super splitting orders

Part VIIIB of the Family Law Act 1975 empowers the court to make two different types of orders with respect to superannuation interests:

• • a splitting order: s 90XT (formerly s 90MT) of the Family Law Act 1975 (Cth); or
• • a flagging order: s 90XU (formerly s 90MU) of the Family Law Act 1975 (Cth).

Superannuation is an asset of the party in whose name it stands and as such will be included in the property pool available for distribution between the parties in a property matter.

Superannuation can also be dealt with by way of a superannuation agreement as follows:

• • splitting order/agreement; and
• • flagging order/agreement.

See Is superannuation property?

Types of funds

Because there are many types of funds to which the super splitting scheme applies, the regulations allow the Attorney-General to approve methods to be used to determine the gross value of specified superannuation interests. The Family Law (Superannuation) (Methods and Factors for Valuing Particular Superannuation Interests) Approval 2003 (Cth) includes factors for determining the value of interests in more than thirty superannuation funds or schemes.

In family law proceedings the majority of the funds are either:

• • accumulated interests (the most common type of fund);
• • defined benefit funds (which are increasingly rare and usually only found in government superannuation funds); or
• • self-managed funds (which are becoming increasingly popular as the Australian population ages).

Funds can also change during the life of the account. For example, in the case of Campbell v Superannuation Complaints Tribunal (2016) FLC 93-724 the Federal Court determined that a superannuation scheme which was a defined benefit scheme, had become an accumulation interest after the payment phase commenced due to the member becoming eligible for a pension as a result of injury.

Valuing superannuation

It is important that practitioners identify the type of superannuation fund in which the parties have interests as the way the superannuation is valued is different depending on the type of fund and nature of the interest.

For example, when a party has an accumulated interest in a fund, the most recent superannuation statement or a Form 6 Declaration (Declaration to accompany application to trustee for information about a superannuation interest) completed by the superannuation fund may be sufficient for the purposes of a valuation, whereas if the interest is held in a defined benefit fund or a self-managed fund a formal valuation by a qualified accountant will need to be obtained.

Practice Tips:

• • Western Australia has not referred its powers to the Commonwealth in relation to de facto relationships. Instead it has enacted provisions under the Family Court Act 1997 (WA) to deal with property disputes between de facto partners (Pt 5A, Family Court Act 1997 (WA)). This does not include the ability of the court to make any orders in relation to superannuation of the sort commonly identified and utilized by parties under the Family Law Act 1975 (Cth).
• • Accordingly, in Western Australia the Family Court of WA takes into account superannuation interests as a financial resource in the same way as the Family Court of Australia did prior to 28 December 2002 and the operation of Pt VIIIB of the Family Law Act 1975 (Cth).
• • However, in 2018 the Commonwealth and Western Australian government announced this would be changing and legislative changes would be introduced to enable de facto parties in Western Australia to split their superannuation as part of their family law property settlements. At the time of writing no bill had yet been introduced.

See Types of funds and methods of valuation.

Splitting orders

A superannuation splitting order is an order or agreement for the division of the sum held in the superannuation fund either by way of a percentage division/split or a dollar division/split.

Once an ordert is made, that order must be served on the trustee of the superannuation fund as prescribed by the Rules. The trustee must then transfer the amount (either $ or %) from the owner’s name into the name of the other fund similar to a transfer from a bank account. The transfer may be by way of the creation of a new interest in the fund on behalf of the non-member spouse or by rolling over the amount to another superannuation fund in which the non-member spouse already has an interest. Each superannuation fund has its own laws in this regard and investigation must be undertaken prior to an order/agreement being made as to the rules/laws of the fund.

See also the Superannuation Industry (Supervision) Amendment Regulations 2001 (No 3) (Cth) and the Superannuation Industry (Supervision) Amendment Regulations 2002 (No 5) (Cth).

Flagging orders

A flagging order is similar to an injunction which prohibits the trustee of the relevant superannuation fund from making payments without the trustee and/or the owner of the superannuation interest first obtaining an order from the court permitting such payment.

See also Splitting and flagging orders.

Superannuation agreements

Parties may make a written financial agreement which includes reference to superannuation interests and how they might be divided if their relationship should break down. Superannuation interests will usually form only part of the financial agreement and is treated as a superannuation agreement for the purposes of s 90XH FLA. Such an agreement can be made before or during a marriage or de facto relationship and will be binding on a superannuation trustee provided it meets the compliance requirements.

See Superannuation agreements.