Superannuation & BFAs: How It Works

Superannuation (your "super") is often the largest or second-largest asset in Australian relationships, especially for couples over 40. Under the Family Law Act 1975, super is treated as property and can be divided between parties just like a house or bank account.

A BFA lets you specify exactly how super will be treated if you separate. Here's the technical breakdown:

Legal Basis: Section 90MC

Section 90MC allows courts (or parties via BFA) to make "superannuation splitting orders" that divide super interests between parties. A BFA can:

• Specify super splitting percentages
• Quarantine pre-existing super balances
• Treat super differently from other property

Key principle: Super is "property" under s. 4(1) of the Family Law Act, which means it's part of the property pool for division purposes.

How Super Can Be Split in a BFA

Option 1: Split Proportionally

Divide all super 50/50 (or any other ratio).

Example clause:

"Each party's superannuation interests shall be split 60/40 in favour of Party A, with the split to be effected by base amount flagging and splitting orders under Part VIIIB of the Family Law Act."

Option 2: Each Party Keeps Their Own

No super splitting: each party retains their own super balances.

Example clause:

"Each party shall retain their respective superannuation interests as at the date of this agreement, with no further claims to the other party's superannuation."

Option 3: Split Only Contributions Made During the Relationship

Protect pre-existing super, but split contributions made during the relationship.

Example clause:

"Party A's superannuation balance as at the commencement of the relationship ($250,000) shall remain their separate property. Any growth or contributions made during the relationship shall be split 50/50."

This requires valuing super at the start of the relationship (use super fund statements or actuarial valuations).

Option 4: Offset Super Against Other Assets

One party keeps all the super, the other gets more of the house or other assets.

Example:
Party A has $400k in super. Party B has $200k in super. Instead of splitting super, Party B gets an extra $100k worth of equity in the family home.

Superannuation Splitting Mechanics (Part VIIIB)

If your BFA provides for super splitting, you'll need to follow Part VIIIB of the Family Law Act, which governs the mechanics of dividing super.

Step 1: Identify Super Interests

List all super funds for both parties:

• Fund name and contact details
• Member number
• Type of fund (accumulation, defined benefit, self-managed super fund)
• Current balance (as at the BFA signing date)

Step 2: Determine Splitting Method

Base Amount Splitting

A dollar amount is transferred from one party's super to the other's super fund.

Example:
Party A has $300k in super. The BFA specifies Party B receives $100k. That's a base amount split.

Percentage Splitting

A percentage of one party's super is transferred.

Example:
Party A has $300k in super. The BFA specifies Party B receives 30%. That's $90k.

Step 3: Flagging Order (Optional)

A "flagging order" prevents one party from accessing their super (e.g., by early release or retirement) before the splitting order is finalised. This protects the other party from super being dissipated.

BFAs can include flagging provisions, but they're rare (usually used in contested court proceedings).

Step 4: Notify Super Funds

Once the BFA is signed, you (or your lawyer) must notify the relevant super funds:

• Send a copy of the BFA (or the relevant super splitting clauses)
• Provide superannuation splitting instructions
• Complete fund-specific forms

Each super fund has its own procedures for implementing splits. Some funds are fast (weeks). Others are slow (months). Self-managed super funds (SMSFs) can be particularly complicated.

Special Cases: Defined Benefit Schemes & SMSFs

Defined Benefit Schemes

These are complex because the benefit depends on factors like years of service, final salary, and actuarial calculations. Splitting defined benefit super requires:

• An actuarial valuation (cost: $2,000–$5,000)
• Careful drafting of the BFA to specify the splitting method
• Coordination with the super fund's rules

Pro tip: If either party has defined benefit super (e.g., government, police, or corporate schemes), get specialist advice.

Self-Managed Super Funds (SMSFs)

SMSFs are trusts, so splitting them is more complex than retail or industry funds. Options include:

• Splitting the SMSF assets directly
• One party rolling out their share to a retail fund
• Winding up the SMSF and dividing the proceeds

Pro tip: SMSFs often hold illiquid assets (e.g., property, private company shares). Splitting these requires valuation and potential restructuring.

Taxation of Super Splits

Superannuation splits under Part VIIIB are tax-free for both parties (no capital gains tax or income tax). This is a major advantage over dividing other assets.

Exception: If super is accessed (e.g., one party cashes out their super), normal superannuation tax rules apply (tax-free component vs. taxable component, preservation age, etc.).

Common BFA Super Clauses

Clause 1: Simple 50/50 Split

"The parties agree that all superannuation interests held by either party as at the date of separation shall be split equally (50/50) by way of base amount splitting orders under Part VIIIB of the Family Law Act."

Clause 2: No Super Splitting

"Each party shall retain their respective superannuation interests, and no party shall make any claim against the other party's superannuation."

Clause 3: Offset Against Property

"In consideration of Party A retaining all of their superannuation interests ($400,000), Party B shall receive an additional $100,000 from the proceeds of sale of the family home."

Why Super Matters in BFAs

• It's big: Average Aussie has $150k–$250k in super at retirement
• It's often forgotten: Couples focus on the house and forget super
• It's divisible: Courts routinely split super 50/50 (or adjust based on contributions and future needs)

If you don't address super in your BFA, and you later separate, it's still divisible under s. 79 and Part VIIIB. Better to address it upfront.

The Bottom Line

Super is property. It's divisible. Your BFA should address it.

Whether you split it equally, keep your own, or use an offset, make sure your BFA has a clear super clause. And if either party has defined benefit super or an SMSF, get specialist advice: don't wing it.

Your lawyer will make sure the super provisions are legally compliant and enforceable.