Superannuation Valuation in Divorce: How the 2025 Family Law Regulations Affect Splitting Super

Before the introduction of the Family Law Legislation Amendment (Superannuation) Act 2001, which came into effect on 28 December 2002, superannuation was not considered as property to be split between separating couples.  It was a “resource” to be taken into consideration by the judge in making orders.  Following the amendments, the Family Law (Superannuation) Regulations 2001 took effect.  The Regulations were reissued with amendments consolidated as the Family Law (Superannuation) Regulations 2025.

The essence of Regulations is the determination of the “gross value” of superannuation interests (which go into the asset pool for division on separation) and the mechanism to arrange transfers between the accounts of the parties.

The gross value of an accumulation (as distinct from defined benefit) superannuation benefit and of an account-based pension is simply the face value of the account at the relevant time. 

For lifetime pensions and defined benefits in the “growth phase” the situation is more complex.  Defined benefit schemes define the benefit in terms of length of service and salary at or near retirement and the employer makes the contributions necessary (in addition to member contributions) to fund the benefits.  This contrasts with accumulation schemes where the contributions are defined, and the benefits derive therefrom.  

Very few defined benefit superannuation funds are open to new members, but many have old members retaining defined benefit rights.

The Regulations set a default method of calculation of the value of the interest using formulae and sets of age, sex and / or membership duration specific factors. 

The Regulations allow for specific funds to set their own methods of calculation as an alternative to the default and, if applicable, they are promulgated in a legislative instrument known as an Approval. 

Few private sector funds go down the approval route but significantly the Commonwealth Superannuation Corporation (CSC) does.  In addition to the Federal Parliamentary Superannuation Scheme (which still has some defined benefit members), the CSC portfolio includes the Public Sector Superannuation Scheme, Commonwealth Superannuation Scheme, Defence Forces Retirement and Death Benefits Fund (DFRDBF) and Military Superannuation and Benefit Scheme, all of which are defined benefit funds.

The general process to determine the value of a superannuation interest is for either the Member or Non-Member Spouse to submit a request to the fund administrator to provide information to value benefits as at a specific date.  This is known as a “Form 6” request.  The Form 6 response from the administrator generally includes the parameters necessary to be included in the valuation formula.  The parties must then arrange a calculation of the value, typically by an actuary. 

An exception to this process is the Government Employees Superannuation Board (GESB) of WA which responds to a Form 6 request with a finished valuation of the benefits.

Once superannuation is valued it is added to the asset pool and a split of superannuation assets may be ordered or agreed.  In the case of defined contribution funds, the relevant amount is simply transferred to an accumulation account of the Non-Member Spouse and the Member Spouse’s balance is reduced accordingly.  Not all funds permit the Non-Member spouse to roll funds to another superannuation.  This is true of CSC funds.  In these cases, funds are locked in until the Non-Member Spouse meets a “condition of release”.

In the case of defined benefit accounts for people still in employment, the relevant amount is generally transferred to an accumulation account of the Non-Member Spouse and the Member Spouse’s benefit multiple is reduced, resulting in a lower final benefit on retirement.

Where a pension is already in the course of payment, the Non-Member spouse is generally granted a pension equivalent in value to the relevant amount and the Member Spouse’s pension is reduced.  Because these calculations are based on age and gender, the new Non-Member Spouse pension is rarely the same as the Member Spouse reduction.

The product of the Regulations is the “gross value” of the subject benefit.  When the Regulations were first introduced, the tax freedom of most benefits after age 60 did not apply.  There are still some funds (“constitutionally protected” or “untaxed” funds) which suffer benefit tax after age 60, but for all intents and purposes for private sector funds the gross value and net value are now the same once one reaches age 60.  Age 60 is now the earliest that one can normally access superannuation.

If one is a member of an untaxed fund, one can improve one’s situation (reduce one’s contribution to the asset pool) by, if possible, rolling funds from an untaxed fund to a taxed fund suffering tax but ensuring the after-tax value is included in the asset pool.  This is generally not possible for defined benefit funds but can be done with untaxed accumulation funds such as GESB’s West State.  If this is not possible, one can bring determine the tax and bring it to the attention of the Court.

The above suggests an action before one submits a Form 6.  This is also the case when one is contemplating seeking an invalidity pension.  A typical situation could involve a member of MSBS or DFRDBF whose relationship is unravelling for service-related mental health reasons. 

Until the member has retired, the valuation process assigns a low probability to the high-cost event of invalidity pension.  Once the member actually retires, the valuation becomes a valuation recognising the certainty of the high-cost pension.  This can result in as much as a threefold increase in the value and hence contribution to the asset pool and therefore a smaller share of other assets to the Member Spouse.

The Regulations apply to Australian superannuation funds including Self-Managed Superannuation Funds (SMSFs).  They do not apply to foreign funds and the writ of the Australian Family Courts does not automatically extend beyond our shores.  The parties may need a parallel action in the foreign jurisdiction.

Typically, foreign superannuation entitlements are valued using the Regulations process and recognised by the Court as such.  If the foreign jurisdiction will not cooperate with the Court order, splitting cannot be affected, and the Member Spouse will retain the foreign entitlements and consequently receive a lower share of other assets.

Often one party will seek to have the Court recognise that it brought significant superannuation into the relationship.  Whether the Court does this is partly determined by the length of the relationship.  If one is seeking to determine the benefits accrued during the relationship, it is not sufficient to subtract the value at commencement from the value at separation. 

In case of defined contributions, the correct value of benefit brought into the relationship is the starting value increased to reflect the investment earnings of the Member Spouse’s chosen investment strategy.  It is this amount that should be subtracted from the final value to determine the benefits accrued during the relationship.

In the case of a defined benefit fund, any accumulation part of the benefit is dealt with as a standard accumulation, but the salary and service-related benefit should be apportioned according to the benefit multiple accrued at commencement and separation.   Thus, typically, if the Member Spouse had been a member of the scheme for 30 years including 10 years before cohabitation, the separation benefit could be apportioned as to one third brought into the relationship and two thirds accrued during it. 

This needs to be adjusted for DFRDBF and MSBS as benefits accrue at different rates depending on the length of service.

Superannuation complicates divorce proceedings and because it is now universal, the best way to remove this complication remains to try to avoid marrying a person one will later divorce.

These complexities highlight why clarity around superannuation valuation in divorce is so important.