If you have been in either a de facto relationship or a marriage that has ended, unless you have a Prenup or Binding Financial Agreement in place, you will be required to go through the financial/property settlement process.
As part of the process you will be required to compile a list of all of your property and assets, which includes superannuation. Given that superannuation is often an asset of considerable value, you will likely want to understand:
- If your superannuation will need to be split;
- How it could be split given that it is typically inaccessible until retirement age; and
- Other insights into entitlements and your options.
But to start, depending on whether you are recently separated or have been separated for some time, you may be interested in the timelines that relate to making a property settlement claim, inclusive of superannuation.
How Long after Separation Can Superannuation be Claimed?
For people in de facto relationships, a claim of any kind, if you have not formalised a property settlement already, can be made up to two years after separation. For this reason, it is important to ensure that you are both on the same page about the date you separated.
For people who have been married, if you have not formalised your property settlement by the time your divorce application has been finalised, then you have exactly one year from the date of the divorce to finalise the division of your finances and property. To formally complete the process, you must have both sought legal advice and have a financial agreement drawn up for you to both consent to.
How Is Superannuation Divided in a Divorce or the end of a De Facto Relationship?
Whether your superannuation or your former partner’s super needs to be split, is taken into account in the financial disclosure process. While we unpack the financial disclosure process in detail on this page, after those steps have been considered, the expected split of property is expressed as a percentage range.
Your family lawyer may advise you that after taking into account each of your contributions, circumstances, future factors along with family law, you may anticipate being eligible for, for example, 45% to 55% of the total asset pool. No family lawyer is able to give you an exact percentage as it will ultimately depend on what agreement you both come to, or if a Judge makes the decision for you.
From there, how your asset pool is actually divided between you will need to be determined. If you have sufficient additional assets that allow you to fund the terms of your agreement, you and your former partner may not need to split your superannuation.
If you have a SMSF (self managed super fund), this is often more complex depending on the financial structures in place. Questions that need to answered include:
- What types of assets are in the fund?
- What options are available to roll out a member’s entitlement?
- Will assets need to be sold to fund the entitlement?
- Does there need to be a split of superannuation to achieve a broader objective in the overall property settlement?
As family lawyers, we often work closely with our client’s financial advisors to determine whether you will be best to exit the SMSF, set up your own separate SMSF, or not.
From a family law perspective, there are also complexities that can arise around the SMSF’s compliance, procedural fairness requirements and other regulations if superannuation is to be split. Given these complexities, it is important to seek legal advice from your accountant or financial advisors along with a family lawyer, to get a clear picture of how any issues will be addressed.
How Can Super Be Accessed At All?
If you and your former partner are young, you will not be able to access your super until you satisfy the conditions of release. If your division of property means that superannuation is to be split, it is not taken as cash. It is to be rolled over into another superannuation fund and accessible only at ‘preservation age’.
If you are older and nearing retirement, or have already retired, the composition of your settlement, and whether it includes the splitting of superannuation is less of an issue.
Potential Superannuation Issues in the Property Settlement Process
In our work with clients we see how issues surrounding superannuation arise. Sometimes it is when accountancy advisors have changed. Other times it is because they may also be because the client may have neglected certain necessary actions and not be in compliance with their super fund. This can lead to substantial problems when implementing a superannuation split.
One example of this is a fund that included a commercial property. The former couple ran their business from that property, having established a lease agreement between their jointly managed company and their personally administered superannuation fund. However, they had not been paying rent at the market rate so there was money owed by the parties to the super fund, which needed to first be addressed.
Another common example is when dividends from shares owned by a SMFL are deposited into one personal account. This necessitates the repayment of funds before a split takes place. Naturally, people often do not foresee these decisions as problematic or understand the importance of these compliance matters, as these might only be revealed during a property settlement.
Problems may occur when dividing superannuation in a settlement, particularly if an asset must be sold to fulfil one member’s entitlement. As an example, if the SMSF owns real estate worth $600,000 but only has $30,000 in the bank where rent is deposited. If you are considering transferring out of your current SMSF, you may need to consider selling that property to extract the funds. Alternatively, you may explore other options such as one of you keeping a larger portion of the superannuation and the other receiving assets outside of the superannuation pool.
The key element here when superannuation, divorce and property settlement is involved, is to ensure you are having early conversations with your family lawyer and your financial advisor, so you can be aware of a range of different scenarios as to how the distribution of assets may occur.
Phillips Family Law is an award-winning Family Law practice serving clients across Australia and abroad. Regardless of where you are in your decision-making process, we can make you aware of your options. To discuss your situation confidentially, phone (07) 3007 9898 or secure a time by filling in our confidential form here.
Disclaimer: The content in this page provides general information however it does not substitute legal advice or opinion. Information is best used in conjunction with legal advice from an experienced member of our team.