According to a news article in the AFR, the number of couples in Australia planning to divorce has more than doubled since the outbreak of COVID-19.1 And whilst it’s not an easy thing to navigate, during a separation or divorce you may end up getting some of your former partner’s superannuation or vice versa, so it’s important to understand the ins and outs. 

Superannuation is for the long term even if you separate or divorce

Whether you’ve been married or in a de facto relationship, divorce and separation can be emotional and confronting when deciding on how to divide up joint assets. 

It’s important to think not only about the here and now, but also about your longer-term financial situation, which includes your superannuation. 

When dividing up your superannuation between you and your former spouse, there are rules to follow that comply with both super legislation and family law. 

This article gives general information on superannuation and divorce and separation. It doesn’t replace the need for professional legal and/or financial advice.

Under Family Law, your super is classified as ‘property’

Depending on your age, yours and your former partner’s accumulated super balances could be in the thousands, tens of thousands, hundreds of thousands, or possibly more. 

For many couples, super is likely to be one of the largest assets after the family home. 

When separating or divorcing, the Family Law Act 1975 (Cth) treats super as ‘property’ meaning it can be valued and divided between partners.

However, because super is held ‘On Trust’, the funds won’t necessarily be converted to cash for immediate access. In fact, either party can only access the funds by meeting certain ‘conditions of release’. These include reaching a certain age, purchasing your first home, experiencing a serious injury or illness, or severe financial hardship.

Am I entitled to my former partner’s superannuation?

According to The Family Law Act 1975 (Cth), generally, you’re entitled to a property settlement, including superannuation, if you’ve been married or in a de facto relationship (which was registered in your Australian State or Territory) and meet one of the following criteria:

  • Have lived together for two years.
  • Have a child together.
  • One of you has made a ‘substantial contribution’ and the absence of a settlement would result in a ‘serious injustice.’

What gets considered when splitting super?

Every divorce or separation is different which is why it’s a good idea to seek expert advice from a Family Lawyer. Any division of property, including superannuation – if not settled privately – is likely to be determined by factors as set out by The Family Law Act 1975 (Cth). 

This can include things like your respective financial and non-financial contributions during your relationship, your respective financial needs and positions post your separation or divorce, what other assets you’re likely to split, and numerous other factors.

It’s important to get advice on how to structure any settlement of superannuation to ensure any potential tax implications are considered. 

Please note that there is a time limit for filing an application to split super. It’s a good idea to ensure you speak with your Family Lawyer about the time limit as it’s different whether you’ve been married or in a de facto relationship.

For information on splitting super, refer to the Family Law Courts website or the Attorney-General’s website.

What steps should I take when deciding to split super?

The Federal Court of Australia suggests the following steps when deciding to split super.

1. Obtain valuation information

If you don’t know how much your former partner has accumulated in super, you can ask their super fund’s trustee for this information, using a Superannuation Information Kit. This kit is supplied by the Family Court of Australia.

2. Decide the method of splitting

There are three options for splitting superannuation. Please seek professional advice from a Family Lawyer before deciding which is the best option for you.

  • Enter into a formal written Agreement. A lawyer needs to sign this stating you’ve both sought legal advice. You won’t need to go to court once this agreement is made.
  • Seek a Consent Order from the Family Court when you’ve reached an agreement
  • Obtain a Court Order if you can’t reach an agreement with your former partner.

3. Send a copy of the Agreement or the Order to the respective superannuation funds

How will the super be split?

The Family Court can help determine the percentage split, or in other words, how much each of you will get, however there are three main options for the actual division of super funds. 

You should speak with your Family Lawyer to help determine which option is appropriate for your own circumstances.

Split type

Description

Payment/interest splitting

Super is split immediately and remains in the super system, or as a payment if you’ve retired or met a condition of release.

Payment/interest flag

Where you wait for an event to occur e.g. impending retirement, and you flag the date of when the super will be split.

No split or flag

Where super is treated as a financial asset like other relationship assets and is divided between you without splitting or flagging accounts.

Please note. Partners can also make a legally binding Agreement on the trustee to split their super outside the court system provided they have each sought independent legal advice.

What if I have a self-managed super fund (SMSF)?

If you’re in a self-managed super fund (SMSF) you’re also a trustee of the fund and it could be a little trickier if your former spouse is also a member and therefore an SMSF trustee. 

The responsibilities of a trustee remain the same as any other super fund, whereby trustees need to act in the best interests of all members and adhere to super law.

There are strong penalties for any SMSF trustee that doesn’t comply with superannuation law, including where they

  • Exclude another trustee from the decision-making process.
  • Ignore requests to redeem assets and roll money over to another regulated complying super fund.
  • Take any action not allowed by Superannuation Industry (Supervision) Act 1993 (SISA) or the SMSF’s trust feed.

It’s a good idea to engage an accountant or an actuary as they are likely to have the expertise required to make accurate valuations about the fund.

Read more about protecting your SMSF savings in the event of a divorce.

What fees will I pay to split super?

Some funds will charge fees for the administrative costs like payment splits, and applications for information. 

You should speak with your Family Lawyer and check with your super fund to see what fees may be applicable to your situation.

Are the rules the same across the country?

Generally yes, however be sure your Family Lawyer checks your applicable State/Territory rules.

Review your beneficiaries and your life insurance

When your relationship status changes, it’s important to review your beneficiary nominations for your super – as this may have been your former partner. 

You can usually change your nomination at any time.

You might also want to look into any life insurance policies (both inside and outside of super) to assess your premium payments and intended beneficiaries.

Where can I go for more help?

Dealing with a relationship breakdown is likely to be difficult, so it’s important to try and eliminate financial exposure or instability as an additional reason for tension.

It is worth engaging professional legal and/or financial advice when going through a separation or divorce. 

Here are a few extra sites that can give you some more information.

You may also be interested in

Read more about how divorce may impact your retirement plans at the BT Retirement Hub.

Visit the Westpac Life Moments Hub for useful videos, steps and guides in separating physically and financially, regaining your independence and when you are ready to rebuild your financial security.

The information is prepared by BT Funds Management Limited ABN 63 002 916 458 (BTFM) the trustee of the following products:

(a) BT Super for Life, BT Super for Life Westpac Group Plan and BT Super part of the superannuation fund Retirement Wrap ABN 39 827 542 991; and
(b) Asgard Employee Super Account part of the superannuation fund the Asgard Independence Plan Division Two ABN 90 194 410 365. 

This information has been prepared as general advice only and does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs before acting on it. Read the Product Disclosure Statement (PDS) to see if these products are right for you by visiting bt.com.au or asgard.com.au. Past performance is not a reliable indication of future performance. All examples are illustrative only. Your portfolio value and performance will depend on the investment options you have selected and the time over which they are invested. 

BTFM is a member of the Westpac Banking Corporation ABN 33 007 457 141 (Westpac) group of companies. An investment in these products is not an investment in, deposit with or any other liability of Westpac, any division of Westpac or any other company in the Westpac Group. Westpac and its related entities do not stand behind or otherwise guarantee the capital value or investment performance of the products or any related assets of the products. 

References

[1] COVID-19 causes spike in family disputes – AFR, August 2020