Divorce is a most emotionally draining process all on its own, but when it comes to divorce and superannuation, things can become even more stressful and complex than they already are. For most cases, legal advice is strongly recommended when it comes to divorce and superannuation.
What Happens To Superannuation When You Divorce?
When you divorce, your superannuation is considered as an asset, and, just like all other assets, must also be divided between the divorcing partners.
This can be done by mutual agreement or by a court order. It must be noted that neither partner may access any payments at the time of the divorce, until they become due, as the superannuation remains subject to the terms of the policy.
Main Options For Splitting Superannuation After Divorce
There are three basic options when dividing super.
- Leaving it untouched, but instead, factoring in the value of super as part of the overall settlement.
- If a mutual agreement is reached, the transfer of the super will go from one person’s super fund account to the other’s account and only be available when retirement age is reached.
- Defer the transfer of super for another time, such as retirement. By putting a “flagging agreement” in place, no funds can be made to one party until the “flag” is lifted.
If no agreement can be reached, a Financial Order can be sought, where the Court will determine how the super will be split.
How Is Superannuation Split In A Divorce?
As with all assets, the division of super has to be done in a fair and equitable manner, but that does not necessarily mean an equal split. Numerous factors are considered such as individual needs of each partner, contributions made by each partner, individual earning capacity, age, children’s needs, length of marriage, etc.
If the superannuation is a self-managed super fund (SMSF), the value of the fund must be determined by an accountant or an actuary.
Can All Superannuation Benefits Be Split?
The quick answer is no.
Interests and benefits cannot be split in the following cases:
Benefits of less than $5000.
Payments made to either party if suffering financial hardship, ill health or on compassionate grounds.
Payments for the benefit of a child under 18 years of age, following the death of either parent.
Payments to a child who is over 18 years, but still dependant on the member at the time of death, to enable the child to complete their education.
Payments for a child who has special needs and the payment is made to another person for the benefit of that child.
What About Death Benefits Nominations?
It is absolutely vital to immediately contact the superannuation fund manager to nominate or update your beneficiaries upon separation or divorce.
These could be your kids, or any other family member or associate, to take care of the children if they are still minors.
What About De Facto Couples?
The same rules apply for de facto relationships, including same-sex relationships in Australia, except for those in Western Australia.
Such couples are encouraged to take into account the value of the superannuation at the time of the break-up as part of the complete settlement agreement.
When it comes to dividing superannuation in de facto relationships, there are specific rules, which can complicate matters further and for such cases legal assistance is strongly recommended.
Need help with your divorce? Chat to our team of family lawyers in Perth who are well-versed with the splitting of assets including superannuation.
Book your free 15 minute call with Hickman Family Lawyers now.