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  • Writer's pictureJarrod Carter

WA’s New De Facto Justice: Superannuation Splitting

Western Australian law makers have finally closed a glaring gap in the law. On 28 September 2022, the law changed to allow separated de facto couples to take advantage of superannuation splitting orders when dividing the assets of a defunct relationship. This means that for long-term unmarried couples, they will now have the legal option of sharing their Superannuation fairly when they separate.

It is noteworthy that the rest of the country has had the option of using these types of orders available to De Facto couples since 2009 when the Family Law Act was amended. The lawmakers of WA at the time refused to give up, or “refer”, the state’s power to the Commonwealth to make laws in relation to de facto couples. While WA’s own Family Court Act gave the Court the power to divide the relationship assets, it fell short of allowing for superannuation splitting orders. In the meantime, practically every other state referred this minor power to the Commonwealth. It was only in Western Australia where separated de facto couples had diminished rights for the last 13 years.

Over the last decade, I have witnessed and read about numerous cases of preventable injustices caused by WA’s glacial pace to update the law. Such cases where after 20 years and three children together, a couple have separated. They rented over the course of their relationship and didn’t manage to acquire real estate. The Homemaker stayed at home looking after the kids and the household, while the Breadwinner worked in paid employment. In the meantime, the Breadwinner amassed several hundred thousand dollars in Superannuation. But with the cost of living, they have no savings - just a couple of tired cars. Until the recent law change, the Breadwinner would walk away with nearly the whole asset pool, leaving the Homemaker with nothing. They couldn’t transfer the Superannuation even if they wanted to.

To make matters worse, the Breadwinner also tended to build a greater earning capacity in the workforce, while the Homemaker was left with no assets and had to retrain to enter the workforce, all with nothing put aside for retirement. Finally, this change in the law will prevent such unfair outcomes in the future.

Most people have a rough idea of what a de facto relationship is. It’s two people who live under the same roof and partake in sexual activities together. However, this is only a partial definition. De facto is actually short for de facto marriage. The “de facto” part is Latin for “of fact”. So de facto is essentially “the same in fact as marriage”. There are a number of criteria listed in section 13A of the Interpretation Act to define what constitutes de facto. “A de facto relationship shall be construed as a reference to a relationship (other than a legal marriage) between 2 persons who live together in a marriage-like relationship.”

If it is “marriage-like”, does that include any relationship where two people see each other everyday and try to act civil while they suppress their seething resentment and regret? The answer is no: de facto relationships are made by the actions of the parties, not the emotional content of their relationship. These can include the length of the relationship, duration of living together, having a sexual relationship, having children together, combining finances, and acquiring assets in joint names.

It is important to know when “dating” transitions into a legally recognised de facto relationship. There are certain milestones that the law looks for to establish it. Because once you are legally declared de facto, each party to the relationship has an equitable right to the assets owned by both parties, even if those assets were owned prior to when you started living together. If you are dating someone and you own three houses, while the other party owns nothing, then this can be an important milestone to be aware of.

Section 205Z of the Family Court Act, allows the Family Court may make orders where; There has been a de facto relationship for at least 2 years; or There is a child of the de facto relationship under the age of 18 and not making orders would result in serious injustice to the partner caring for/responsible for the child; or the Applicant has made substantial contributions.

When do you know your relationship becomes the “same in fact as marriage”? Living together for two or more years is one of the most significant indicators. Also, buying a house together and sharing a bank account can assist in determining a de facto relationship. Additionally, if you live together and have a child with your partner, you are almost certainly in a de facto relationship.

With the changes to the de facto superannuation splitting laws, there is now a greater need to be careful when you live with a partner. Especially in circumstances where you are entering into the relationship with a greater amount of assets, including superannuation. Most people have heard of a pre-nup agreement, which in Australia is called a Binding Financial Agreement. People generally enter into these agreements before they get married. These agreements often include a stipulation that if the relationship ends, the parties walk away with the assets that they brought into the relationship. However, many people aren’t aware that you can enter into a similar agreement before, and even after, commencing living in a de facto relationship. You wouldn’t call it a “prenuptial” agreement, but perhaps a “pre-facto” agreement. It may be worth considering.

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