Wednesday, 11 June 2008

Splitting super: Step 1- were you married or de facto?

Having been a Brisbane family lawyer for many years, I've learnt that there are some basic rules that apply when you are going through a property settlement and want to split your (or your ex's) superannuation.

Step 1

Were you married or de facto?

Despite what you might have heard from friends, there is a huge difference if you were married or de facto (including same sex relationships).

The reason is simple: super splitting for married couples can occur relatively easily under the Family Law Act; but super splitting for de facto couples is under State or Territory laws and is much harder.

To explain, some fundamentals about the different types of super are required. I don't want to wax jargonesque, but bear with me.

The Commonwealth does not have power to legislate about superannuation. It does have power to legislate about tax. The Commonwealth wants a similar system for all superannuation funds, so to do this it gives tax breaks. To get a tax break, a fund must be a complying fund. Most funds are complying funds, but there might be some rare funds that are non-complying funds.

When the super splitting amendments were made to the Family Law Act some years ago, they came in because they were badly needed. At that time the Family Court did not have the power (except in limited circumstances) to split super, and devised up to 6 different tests that might apply as to what might happen.

Some of these "tests" were derided as "palm tree justice".

Commonly what was seen was that in a traditional marriage where the husband might go out and work and the wife stayed home and cared for the kids (or did some parttime work as well), the significant property they owned would be the house (subject to a mortgage) and his super. Sometimes the super was worth as much as, or more than everything else put together. It would be easy if he were approaching retirement- wait until he retired. But what if they were in their 30's? If she were to keep the house, then he would get the super- which meant that she would not get any future entitlements (but security for her and the kids) and he would get the super, but not be able to touch it for say 30 years, and be unable to start over and get his own place.

There were some exceptions to this inability to split- wait until the member retired, or if there were a self-managed super fund, make an order to split.

The other difficulty was that even if the parties agreed on a split, then aside from self-managed funds, there was no way that it was binding on the trustee of the fund.

I am mentioning all this history, because this is exactly where de facto and same sex couples are now. They cannot get a split except in these circumstances, because when the Howard government amended the Family Law Act, super splitting was not widened to cover de facto or same sex couples.

Rudd,under Attorney-General Robert McClelland, like Howard, has talked of amending the Family Law Act to cover same sex couples. Agreement with the States is required. If and when that happens, presumably super splitting can cover de facto couples.

No comments: