If you’ve separated from your spouse, the first step in a property settlement is to compile an accurate list of your and your spouse’s assets and debts … and their values.
Normally, the assets are divided into two separate pools:
One pool comprising the superannuation entitlements;
The other pool comprising all other assets (the “non-superannuation” assets).
The reason for this is that superannuation is different to other assets. Superannuation is there for when you retire.
The normal approach by the Court is that there needs to be an appropriate division of the non-superannuation assets (and debts) and an appropriate division of the superannuation.
Superannuation is not automatically divided in a set percentage – for example, it is not automatically divided equally. With superannuation, it is common that one person may have had more superannuation than the other person at the commencement of the relationship and this may be a factor in arriving at an appropriate division of the superannuation.
Sometimes, by separation agreement, the person with more superannuation may keep their superannuation and receive less of the non-superannuation assets.
All property settlements should be finalised by way of Court Orders or a Binding Financial Agreement (“BFA”). This is necessary when there is a superannuation split.
Even if there isn’t a superannuation split, it’s a very good idea to have Court Orders or a Binding Financial Agreement (separation agreement), for various reasons including:
a) Finality … neither person can come back at a later time and have a second bite at the cherry!
b) Exemption from Government stamp duty (usually saving thousands of dollars!) when there is an interest in real-estate being transferred from one party to the other party – eg, a joint interest in the family home. The amount of the exemption is often over $5,000 which is normally more than the legal fees involved in the preparation of a Binding Financial Agreement or obtaining the Court Orders. Let me give you a couple of examples …
Peter and Sarah have a home worth $500,000. So half the value is $250,000. If Peter transfers to Sarah his half interest in the property where Court Orders have not been obtained, Sarah pays $7,240 in stamp duty on the Transfer. However, if Peter and Sarah had spent $3,500 to $4,000 on having a family lawyer obtain Court Orders, the stamp duty would be $NIL. On that example, they’d be $3,240 to $3,740 better off … and have “finality”.
If the value of the home was $700,000, stamp duty on $350,000 (being half the value) would be $11,240. So, if legal fees were $3,500 to $4,000 to have the Court Orders obtained, they’d be $7,240 to $7,740 better off … and have “finality”.
As a final point, if you reach a property settlement which requires you to make a payment to your ex-spouse then you need to ensure that you have the necessary finance in place to make the payment.
Defaulting on a Court Order to make a payment will result in “late payment” interest accruing and/or the sale of one of your assets.
If you have any further questions relating to property settlements and superannuation please contact our Family Law Team.