Setting the Record Straight: Election Superannuation Scare
The effects of divorce on family and finances have regularly featured in the headlines over the past twelve months; and as we approach the 2016 Federal Election, the spotlight is only growing brighter on the issue. The headline, "The Coalition’s $714k shock for Divorcees" in The Age, 16 May 2016, provides the early morning paper peruser with yet another reason to curse the family law system. Yet, despite the ominous predictions made for the financial future of parties going through a family law settlement, in practice, there is limited cause for concern regarding the Government's proposed changes to the superannuation rules couples who are separating.
The current concerns surrounding the proposed chances by the Coalition to non-concessional superannuation contributions to $500,000 across a lifetime, is unlikely to impact many separating families. The article uses an example of a property settlement where the wife retains the former matrimonial home (nearly 100% of the non-superannuation assets), and the husband retains the bulk of the superannuation assets. The article points out that in this scenario the proposed changes would mean that the wife would be afforded insufficient time to adequately build up her superannuation entitlements, post-separation. Therefore, her ability to support herself in her retirement is greatly diminished due to the proposed limits on non-concessional contributions.
In reality, a situation where one party receives no superannuation split as part of a property settlement is rare. Since the introduction of legislation under the Family Law Act in 2002 enabling the splitting of each spouse parties’ superannuation entitlements, the case law has supported a distribution of superannuation and non-superannuation assets between parties. Put simply, the legislation for superannuation splitting was introduced to stop one party being left with superannuation, and the other with the family home. Accordingly, in practice, a split of superannuation will be implemented as part of the ultimate property adjustment in recognition of each parties’ future needs. This is particularly relevant in the case of a long marriage or relationship, where the superannuation entitlements of each party will in many instances be equalised.
When adjusting property between parties, it has always been important to give consideration to the superannuation available to each party and their ability to accrue superannuation in the future. This is not a new issue, and not one that will be enlivened by the proposed changes to the superannuation legislation.
We endeavour to provide our clients with practical advice which includes contemplation of the division of superannuation entitlements, which will enable financial security and protection, both now and in the future, to each party. In order to structure a settlement which best suits your particular needs, we recommend promptly obtaining advice regarding your property matters following the breakdown of a relationship.
For more information please contact a member of our Family Law team.