Going through a breakup may be a difficult period for a person emotionally. However, it may also have a negative impact on your finances, which is likely the last thing you want to deal with at this point in your life. Let’s take a look at how divorce and superannuation operate, as well as what happens when you and your partner cannot come to an agreement on how to divide them.
Before we get started, it is necessary to mention that this article solely discusses super splitting and does not take into account the administration of non-super assets, which includes the value of assets.
How divorce and superannuation work?
When a marriage or de facto partnership ends, superannuation is usually included in the pool of assets that may be split between the individuals involved, according to the Family Law Act 1975 (Cth). Because various states and territories may have different laws (especially if Western Australian law applies to you or your ex-spouse), you should get your own legal counsel to find out which laws apply to you based on your specific situation and where you reside.
If you are unable to come to an agreement, the court may usually decide on a settlement for you. Although the super pool that is owned by two people is deemed “joint property,” it is important to remember that the super pool is not always divided equally after a divorce. The Family Court will take into account what is fair and just for both couples, as well as criteria such as:
- Super contributed throughout the marriage
- The ability upon the marriage
- Any responsibilities or obligations to children or dependents
You will usually not get superannuation as cash in a divorce, unlike other assets. Before it may be accessible, it must still comply with the same terms of release and preservation legislation.
How superannuation is assessed?
Super should be taken into account in any asset appraisal that occurs during a separation. Before super may be divided, the entire amount of super is usually computed for both parties.
Depending on your case, you may be able to either apply to the court to get information regarding the value of super held by the ATO or contact the trustee of your ex-spouse’s super fund. For the latter, you may find further information on the Superannuation Information Kit on the Family Court of Australia website.
You should get legal guidance before making a choice so that you can determine which option is best for you.
Ways to divide
Couples who are separating usually divide their superannuation by:
- Agreement: Creating a formal written agreement that outlines how to divide the super. In this case, couples who are separating would work with a lawyer, who is required to sign a document that states that independent legal advice has been given.
- Court order: You may get an order from either the Federal Circuit and Family Court of Australia or the Family Court of Western Australia (whichever is applicable to your circumstances) in one of two ways:
- Consent order – by agreement or consent of the parties;
- Court Order – where an agreement cannot be reached. If you want to pursue court orders regarding superannuation, you will need to fulfill additional requirements, such as informing the appropriate super fund trustee at certain periods.
You may go to the Family Court of Australia website to learn more about these approaches. We suggest that you get legal assistance to determine which option would be the most suitable for your case and to learn about any procedures that need to be taken in order to meet the criteria for each dividing technique.
Different kinds of court orders
A super splitting order will specify the amount of the super balance that will be transferred from one party to another. As stated in the order, it might either be a percentage or a set sum.
If there is a worry that someone could attempt to withdraw money from their super before it has been divided fairly, a super payment flag (flagging order) may be implemented. This is particularly true if one individual is nearing the point at which they can access their super.
The court has the option to impose a hold (or “flag”) on the super interest instead of dividing the super right away. The hold will remain in place until a court order is issued to remove it or until a flag lifting agreement is placed on the trustee of the super fund. The super is handled according to the conditions of the payment flag after the applicable criteria have been fulfilled.
Transferring or rolling over from one account to another
When it is time to divide the super, a super fund may allow the spouse who is not a member to form a new super account for themselves in the same fund. The fund may then transfer the amount of super owing to them into that account.
If this is not the case, the super fund may transfer or rollover the interest to a different super fund for the spouse who is not a member.
If you need further information, you may always reach out to the appropriate super fund trustee.
