Family Law Super Valuation

Family Law Super Valuation

The Family Law Act allows separating couples to share their superannuation interests in the same way as other property. Splitting a superannuation interest requires a Family Law Valuation (‘FLV’), per the valuation rules in the supporting regulations to the Family Law Act.

Actuarial Support provides an expert FLV calculation for the following superannuation interests: defined benefits, partially vested accumulation benefits, fixed pensions, lifetime pensions, superannuation annuities and superannuation deferred annuities.

Assessment of Family Law Valuation Basis

Actuarial Support can provide observations on the fairness of the FLV valuation basis. These observations could be ‘section 79(5) factors’ that are relevant arguments to the split of property.

The FLV’s follow a prescribed methodology, including fixed factors. It is not the true economic value of the superannuation interest.

  • Eg. The FLV basis is infrequently reviewed, the underlying investment assumptions may be out of date.
  • Eg. The health of the pensioner is not considered in the FLV. We can re-calculate the FLV based on the actual health of the pensioner.
  • Eg. The marital status of the pensioner is not considered in the FLV. We can re-calculate the FLV based on the actual marital status of the pensioner.

Request a Family Law Valuation

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Additional Information Required

  • Superannuation information statement / form 6.

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Family Law Super Valuations – Guidance & Insights

The Family Law Act enables divorced or permanently separated couples (married or de facto) to split their superannuation interests in the same way as other property. Superannuation interests include superannuation in both the accumulation and pension phases.

The parties can negotiate and agree how the superannuation interests will be split and shared. They may also agree that no sharing of superannuation will occur. If the parties cannot agree, the Family Court can make an order to split the superannuation interests.

An agreement to split superannuation interests will specify either a dollar amount or a specific percentage of the interest to be share. When the agreement is a dollar amount, interest may be payable up to the point of settlement.

The individual receiving a superannuation interest has options in how to process the superannuation interest. Their options may include:

  • Create a new interest in the same super fund;
  • Transfer the benefits to another complying super fund; or
  • Receive an amount as a lump sum payment, subject to preservation laws which generally require the individual to be retired.

A Family Law Valuation (‘FLV’) is the value of the superannuation interest to be split. The methodology is prescribed in the supporting regulations to the Family Law Act.

The methodology for a FLV depends on the type of superannuation benefit. The different approaches to determining the FLV are outlined below.

Often the FLV is the account balance shown on a member statement. The is true for Accumulation Accounts, Account Based Pensions, and older variants of Account Based Pensions: Allocated Pensions, Market-Linked Pensions, Term Allocated Pensions and Post-retirement Transition to Retirement Income Streams (TRIS). 

Where the FLV is the account balance, the FLV doesn’t require an expert valuation.

In limited circumstances, the FLV will require a calculation by an expert. This service is provided by Actuarial Support.

Defined Benefit Funds

For Defined Benefit interests, a members retirement benefit is based on the member’s final salary, years of service and multipliers defined in the fund’s rules. 

The FLV for a Defined Benefit interest (outside an SMSF) is calculated under a default methodology and factors prescribed by the Attorney General, unless the scheme has sourced approval to use a scheme specific methodology and factors. Rules for determining the FLV of a defined benefit interest in a SMSF are described below.

Partially vested accumulation interests:

This occurs where there is in additional benefit added to the account balance “accumulated” from contributions and investment earnings. Eg. The member can access at retirement an extra amount if they take certain actions, such as staying with the same employer for a minimum number of years.

The FLV for partially vested accumulation interests is based a methodology and factors prescribed by the Attorney General.

Other (not account based) pensions

This includes fixed pensions, lifetime pensions, superannuation annuities and superannuation deferred annuities. These products pay an income based on certain rules (fixed term, whether someone is still alive and indexation).

The FLV for annuities is based a methodology and factors prescribed by the Attorney General.

For a Self-Managed Super Fund (SMSF), the FLV used for splitting superannuation interests is based on a valuation of the assets of the fund It is common to engage professionals like accountants and specialist asset valuers to assist in determining the value of assets. The FLV is the value of each member’s account and an allocation of reserves not yet allocated to member accounts.

The government has drafted new tax requirements known as Division 296 tax. Under these requirements FLVs are to be used in your Total Super Balance that will impact potential Division 296 tax. Where a SMSF has a defined benefit interest, then the FLV used will be determined per the rules for Defined Benefit Funds above.

If it is not clear what superannuation interests exist in a relationship, an application can be made to the Australian Tax Office (‘ATO’). To make a request, the applicant must be part of a current property settlement proceeding concerning to their marriage or de facto relationship.

For more on how to request information from the ATO, visit the FCFCOA Visibility of superannuation  page, or the FCWA Superannuation  page if you are in WA.

Once the superannuation interests of a partner have been identified, the next step is to request information from each super fund to value the superannuation interest.

For many funds the request for information is done via the standard form prepared by:

Some schemes have their own forms to request information: