Drafting effective and enforceable property settlement orders concerning superannuation requires careful attention to legal nuances and procedural requirements. This is especially true for superannuation splitting orders, which involve additional layers of complexity.
What exactly is a superannuation splitting order?
According to the Family Court of Western Australia ‘superannuation splitting orders’ are simply orders used to divide parties’ superannuation interests or entitlements.
Superannuation splitting orders are primarily used in the context of divorce or the dissolution of a de facto relationship. These orders are part of family law proceedings to ensure that superannuation interests are divided fairly between parties when a relationship ends. However, they can also be relevant in other family law contexts, such as when dealing with the financial settlement after a separation.
Like most assets accrued in a marriage or de-facto relationship, ‘superannuation entitlements’ can be treated as ‘property’ and therefore can be split between separating parties at the time of a property settlement.
What are the requirements for superannuation splitting orders?
Specifically, orders made under sections 79 or 90SM of the Family Law Act 1975 (FLA) should be crafted on a personal basis to ensure their efficacy.
However, when it comes to splitting orders under section 90MT of the FLA, a different approach is warranted.
According to Wilkinson and Wilkinson (2005) FLC 93-222, a superannuation splitting order only requires a clear statement binding the fund’s trustee to the terms of the order under section 90MT FLA, provided the trustee is given procedural fairness.
While trustees are entitled to procedural fairness, they do not have the authority to dictate order wording. However, aligning with a trustee’s preferred wording can streamline the drafting process and remove many unforeseeable issues down the track.
Many public offer and industry superannuation funds provide preferred wording templates on their websites, ensuring accurate naming and minimising disputes over order language.
Another essential component of splitting orders regards specifying an ‘operative time’, ideally the date of valuation of the interest, to facilitate adjustments of the base amount in compliance with regulations.
According to Stevens and Stevens (2005) FLC 93-246, it is crucial to correct technical defects in orders to ensure their legal effectiveness. This includes accurately identifying the type of order made and binding the trustee only to relevant clauses.
Although the FLA does not require specifying an operative time in court orders, Stevens and Stevens is cited as authority that it should be included to avoid ambiguity and ensure compliance.
How does this work with self-managed superannuation funds?
For self-managed superannuation funds (SMSFs), specifying the Australian Business Number (ABN) enhances specificity. Ensuring correct fund naming and adherence to preferred wording not only expedites the order-making process but also mitigates potential delays and disputes.
What are the elements of an effective superannuation splitting order?
Drafting effective superannuation splitting orders involves several key elements:
- Allocate a base amount or percentage
- Grant the non-member spouse an entitlement
- Bind the trustee to calculate and pay the entitlement when making split payments
- Specify an operative time for adjustments.
Navigating the complexities of divorce superannuation splitting orders requires meticulous drafting, adherence to legal standards, and consideration of trustee preferences. By incorporating these elements, parties can facilitate smooth and efficient resolution of property settlement matters involving superannuation assets.
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As Perth’s trusted family and divorce lawyers, Loukas Law is dedicated to safeguarding your family’s rights and well-being. Contact us today to understand how the law applies to your situation, including divorce superannuation splitting, and how we can assist you in navigating these changes seamlessly.