Below are some common questions we are asked about separation, divorce and superannuation. We answer:
- What are the separation superannuation entitlements in Australia?
- Is my ex de facto entitled to my superannuation?
- How is superannuation valued in a property settlement?
- How is superannuation split if it’s not intended to be accessible until retirement?
We will also clear up some misconceptions that people often have about superannuation splitting.
Separation Superannuation Entitlements in Australia
Upon separation of a de facto relationship or marriage, superannuation is treated in a similar way to property. That is, superannuation is considered an asset so just like cash, homes, stocks, jewellery, vehicles, investments and so on.
As part of the family law process, generally speaking, the first step a Court would undertake is to identify and value the property pool. This includes the assets, liabilities and superannuation interests of the parties. So, superannuation forms part of the property pool that is capable of being divided between separating couples.
However, there are separate rules and regulations around how superannuation can be dealt with, which we’ll explain below.
Is My Ex De Facto Entitled to My Superannuation?
In short, yes. If your relationship is classified as a de facto relationship, then just as in a marriage, you are technically, potentially entitled to consider each other’s superannuation. That is because both of your superannuation funds are considered as part of the property pool.
Importantly, it is not a case of someone being given your superannuation upon separation. The property settlement process is an important one to get a big picture understanding of. To understand how a financial separation is to be undertaken, ensure you visit this page about the property settlement process.
If you are separated from a de facto partner and you have not been through the financial separation process and formalised your agreement, an ex may be able to make a claim, and commence the property settlement process. This is possible if the date of your separation was less than two years from the date of an Application being made to the Court, without the permission of the Court first having to be obtained.
When you both either reach an agreement, or a Court decides for you, your superannuation may or may not be ultimately ‘split’ or shared. If there is sufficient funds or other assets available to fulfil the terms of the agreement or Court Orders, then the super may ultimately not need to be touched.
Let’s now unpack how superannuation is treated in a property settlement for separating de facto partners or spouses. In particular, addressing the question of how it can be accessed at all, given the goal of superannuation funds.
How is Superannuation Valued in a Property Settlement?
To calculate an overall division of assets and liabilities, superannuation is treated in the same way as any other asset. For example, $1 of superannuation is the equivalent to $1 of non superannuation assets such as cash or property in dollar terms. So, if one person was to have a hundred dollars in cash and the other person was to walk away with a hundred dollars in superannuation, that would be an equal division of the property pool. This would be the outcome if, of course, the cash and superannuation are the only assets in the property pool and the split was determined to be 50-50 (which is not always the case).
However, different superannuation interests may be treated differently when valued. For example, if you have a standard or mainstream super fund, like Sunsuper, for example, you can generally get a screenshot of the daily balance and how it is invested. It might tell you it is worth a hundred dollars at that point in time.
But there are other types of superannuation interests such as Defined Benefit Super Funds. Superannuation funds often referred to as ‘military super’ for example, are not always valued as straightforward as looking at a statement and looking up the value of the fund For that reason, sometimes it is worth having an expert value that super interest.
There are also Self Managed Super Funds (SMSFs) and for these we generally need to look at the Deed that governs that fund to ascertain the trustee of the fund, as well as who the members are, as well as financial statements. Sometimes valuations of the assets owned by the fund are required. Consideration also needs to be given to what both of your intentions are moving forward for the fund.
Given that there are strict rules about when super can be accessed, including a need to meet retirement conditions, how is superannuation allowed to be split?
How is Superannuation Split if It’s Not Intended to Be Accessible Until Retirement?
It is possible as part of a family law property settlement for there to be a superannuation split from one person’s superannuation to another person’s chosen fund.
Before a superannuation split can occur, an Order or a Binding Financial Agreement needs to be made. That is, a formalised agreement between the parties or ordered by the Court under the Family Law Act. The Agreement details exactly what that split is going to be and can normally be expressed as being a percentage based split or calculated by using a base amount.
That Order or Agreement is binding (enforceable) only on the parties of the proceedings. It is not automatically binding on a third party, such as an external superannuation fund. Generally speaking, they are not bound to do anything. This is why there is a strict process that is to be followed before the Court will make any superannuation splitting Orders.
There is a requirement to put the Trustee of the superannuation fund on notice of the parties’ intention to apply to the Court to seek a Superannuation Splitting Order, prior to seeking an Order or entering into an Agreement and once made, requiring the superannuation fund to take certain steps to give effect to any agreement.
Normally, that involves writing to the superannuation fund and providing them with a copy of the Draft Orders or Agreement and asking for the Trustee to confirm whether they require any specific changes be made to the Orders.
Then, generally what happens is the superannuation fund then writes back and says they do not have any objection to the proposed Orders or asks for minor amendments to be adopted. Following this, we can then ask the Court to make the Orders, providing the confirmation from the superannuation fund.
Misconceptions About Super Splitting
A common misconception is in relation to super splitting equalling ‘cashing out’. For example, people sometimes believe that if someone has a hundred thousand dollars in a superannuation fund and if they were to get a superannuation split of 50%, they will receive fifty thousand dollars cash. However, it is not possible to get fifty thousand of that superannuation and convert it to cash immediately. It can only be transferred from one superannuation fund to another superannuation fund, to be accessed only once conditions of release (usually reaching retirement age), are met.
There is also no obligation for there to be any superannuation splitting Orders at all.
Another misconception is that neither of you have to end up with the same percentage of superannuation as non superannuation assets.
For example, if the agreement is that there is a 55/45 (%) division of the overall property, it doesn’t have to be a 55/45 of non-superannuation assets and 55/45 of superannuation assets. It is about looking at the entire picture and structure of a settlement what is ultimately just and equitable (words from the Family Law legislation) based on each person’s circumstances now and into the future.
Related: The Property Settlement Process
Additional Considerations
There are different types of superannuation interests, including accumulation interests, self managed funds, and defined benefit funds.
Some superannuation funds are not capable of being subjected to superannuation splitting Orders. For example, some military funds do not allow a superannuation split at all. In these cases, alternative arrangements will need to be made to account for the value that would otherwise have been shared.
And, if a super fund is less than $15,000 in value, then it is also not capable of being split.
Separation, Divorce and Superannuation Splitting Advice
There can be strategic advantages to people having funds in a superannuation environment where there are different taxation consequences. And, depending on your ages, when you may be able to draw on your super benefits, may influence the terms of your property settlement.
This is why working together with our clients’ accountants and financial advisors is so helpful. It means that the terms of the Agreement have taken into account a full view of our clients’ personal and financial circumstances, including their short and longer term (future) needs.
It is crucial to seek out specialist advice about property settlement and involve people who can see the bigger picture when considering your financial settlement.
Accredited Family Law Specialist
Related Information
Additional Property Settlements, Separation & Divorce Information
Share This Page
