No time to read the full article? We’ve summarised the most pressing points on superannuation and separation for you below:
- Superannuation is, in fact, an asset that can be divided in the divorce or separation process
- Superannuation rules still apply, and superannuation generally cannot be paid as a liquid cash sum until retirement, even if you are found to be entitled to a portion of your ex-partner’s superannuation.
- A “50-50 split” is neither the default nor guaranteed: engaging a family lawyer is your best first step to ensure your superannuation is protected and fairly distributed.
Under Australian Family Law, superannuation is considered property, which means that it can be considered as part of a property settlement following a relationship separation. While most people recognise the importance of their superannuation as an individual, it’s often overlooked in a partnership, which can have significant ramifications for long-term financial wellbeing if handled without care. Superannuation isn’t automatically divided equally, nor can it usually be accessed immediately after separation.
As a family or couple, a separation can be a stressful and deeply overwhelming time. We’re here to provide the right information that guides you through even the more complex components, so that nothing is overlooked and you can feel confident taking the next steps.
This article will help you understand what you need to know about superannuation and divorce in Australia, explaining super splitting options, guiding you through common misconceptions, and clarifying where independent legal advice is needed.
Is Superannuation Included in a Property Settlement?
In a financial settlement, superannuation forms part of the overall property pool. This is true for both married couples and eligible de facto couples.
How is super split after separation?
There are two main methods of splitting superannuation in a divorce or de facto separation. Just as with other property, superannuation can be split through either an agreement or a court order.
Agreement Between the Parties
Working with advice from a family lawyer, both parties can come to a formal agreement to divide the superannuation. However, this does not mean that joint superannuation will be split 50-50 and distributed as cash. This asset is still subject to superannuation legislation, and you will not generally be able to withdraw it unless a specific condition (like retirement) is met. Each settlement is assessed individually, and the outcome will depend on a couple’s circumstances.
Court Orders
If the two parties cannot reach an agreement, the Federal Circuit and Family Court of Australia can divide the asset. However, as with an agreement, the split is not generally released from the superannuation system, and is usually expressed as a percentage of an individual’s super, or as a specific base amount, where applicable under the legislation.
This means that the party receiving the additional superannuation will have the amount transferred to their superannuation account rather than have it paid out in cash.
Does Superannuation Get Split 50/50?
One of the biggest misconceptions around assets and super in divorce is that there is a default 50-50 split. While couples can come to an agreement around an even split, this does not reflect how courts evaluate a couple’s assets. It’s important to understand that superannuation is only one part of this process of asset division – it will be considered as part of a pool of assets and a coalition of factors.
Courts will take into account a broad range of factors when determining an equitable split, including:
- Financial contributions: This includes an individual’s salary, wages, pre-owned assets, and any other ways they support shared assets and family members monetarily.
- Non-financial contributions: These can include other non-monetary supports that an individual provides in a marriage or partnership, such as support of a partner’s career, unpaid work in a family business, as well as caring for extended family members.
- Homemaker and parenting contributions: This accounts for contributions to childrearing, domestic work, and any work done to increase or maintain the value of a shared home.
- Future financial needs: This takes into account an individual’s earning capacity and financial support systems. In short, it evaluates how their domestic circumstances, health and age will likely impact their ability to work and provide for themselves and any dependents.
- Overall asset pool: The other assets held within the shared asset pool are also considered when dividing superannuation, ensuring that a holistic view of finances is maintained.
How Is Superannuation Valued?
The way your superannuation is valued can be complex and will depend on a number of factors, including its fund type.
Accumulation funds
With this type of fund, the determination of value is relatively straightforward. The fund will – after receiving an information request – calculate a “family law value” (FLV)which takes into account the account’s balance, alongside other components like investment earnings, taxes, and fees.
Defined benefit funds
Defined benefit funds require a specific actuarial valuation, as they calculate a pension based on salary and years of work, rather than a simple pot of accumulated funds. This FLV must be calculated by an actuary, taking into account specific government regulations and personal factors.
Self-managed super funds (SMSFs)
With an SMSF, an independent valuation is required, and a formal court order or binding financial agreement (BFA) is required. Removing a partner as a trustee of the fund can be a complex process and, as a result, the fund may need to be wound up or restructured.
What Happens to Super After It Is Split?
Super does not usually leave the superannuation system, and is not generally converted to cash to be accessed immediately. Any division of super will be from one spouse’s super account to another’s, and all normal superannuation preservation rules apply. So, while a super split does alter the ownership of super interest, it does not immediately result in access to retirement savings as a lump sum amount.
Common Mistakes People Make About Superannuation and Divorce
Overlooking super can significantly affect the fairness of a property settlement. So, we’ve compiled a few of the misconceptions and truths here for your easy reference.
Do not assume super belongs solely to the super account holder in a divorce.
It is an asset that can be divided, in a similar manner to any other asset in a marriage, while still being subject to superannuation regulations.
Do not ignore super during property negotiations.
Superannuation can be a significant asset, and – as with other assets in a marriage – can be divided through divorce proceedings.
Super isn’t automatically divided equally.
Take time to understand the factors which will determine how your super is divided in the event of a separation.
Obtain current super valuations.
Ensure that you receive current, accurate super valuations, and remember that the valuation does not automatically equal the accumulated amount in an account.
Do not delay seeking legal advice until late in negotiations.
Get a clear picture of how your superannuation is likely to impact asset division early by seeking independent legal advice, and get tailored advice on how to protect yourself from unfair asset distributions.
Why Early Legal Advice Can Make a Difference
Family lawyers are here to help you get what you’re entitled to – and that entitlement must take superannuation into account.
A Family lawyer can help you by…
- Identifying superannuation interests: Family lawyers can help investigate and locate super in complex, inactive or “forgotten” funds.
- Requesting information from super funds: They can help by serving official declarations and requests to both super funds and the Australian Taxation Office (ATO), to ensure that you have a clear picture of all superannuation assets in the relationship,
- Advising on valuation method: Especially with SMSFs, valuation can be complicated and require independent advice.
- Negotiating property settlements: A family lawyer is in the best position to help you get a fair resolution outside of family court.
- Preparing binding agreements or court applications: Ensure you’ve got the right documents to help you get a fair outcome.
- Ensuring compliance with family law requirements: A family lawyer will be able to advise on current legislation around the division of assets and your responsibilities.
Superannuation and divorce can come with more complexities than most couples imagine, particularly due to the regulations around super and its distinction from other types of assets.
If you’re looking for guidance on any of these matters, we’re here to support you in finding the fairest possible outcome. We understand just how stressful a separation can be, and work with care throughout the entire process. Whether you’re negotiating or undertaking court proceedings, we’re committed to finding what’s best for you and your family.
If you’re separating and have questions about superannuation or property division, contact the experienced team at Freedom Family Law for clear advice tailored to your individual circumstances.
Frequently Asked Questions
Can my ex-spouse/ ex-partner claim part of my superannuation?
Yes, your spouse may be entitled to part of your superannuation: it’s important to seek legal advice around the division of assets early in proceedings so that you can get guidance toward the best outcome for your future.
Can de facto couples split superannuation after separation?
Yes, de facto relationship splits can also involve the separation of assets, including superannuation. In Australia, you can apply to a court for division of assets up until two years post-separation date.
Do I receive cash if my former partner’s superannuation is split?
You are unlikely to receive a lump sum cash payment in the case that you are found to be entitled to a portion of your partner’s super. It will likely be transferred to your own superannuation account, either directly or by having you create a new account with your partner’s super fund.
Do I need a lawyer when splitting superannuation after separation?
While you do not technically require a lawyer to split superannuation, unless you have an SMSF, it can greatly assist in navigating complexity and ensuring an outcome that protects your best interests. It’s important to note that informal agreements around super splitting are not legally valid for SMSFs: legal advice must be sought.
What is a binding financial agreement (BFA)?
A binding financial agreement is a formal written agreement that outlines financial arrangements between both married and de facto couples. It is legally binding and is generally created in conjunction with a legal representative. In the case of superannuation, you may have an agreement outlining how your superannuation splitting should occur in the case of a relationship breakdown.
This content is general in nature, is not comprehensive, and does not constitute formal legal advice.