Divorce and Superannuation - things you need to know
Superannuation and relationship breakdowns
When a relationship breaks down, superannuation frequently represents a significant part of the asset pool of the relationship and often raises the most questions. Understanding how to protect superannuation in divorce, or how to split superannuation after divorce as part of a property settlement is important. Superannuation splitting rules can be complex, as many factors influence how much superannuation a person has been able to accumulate, for example, when a party has taken parenting time away from the workforce.
The effect of a divorce superannuation split
Superannuation splitting in divorce can be achieved in two ways: through Consent Orders approved by the court, or by entering into a Binding Financial Agreement that complies with the Family Law Act.
Importantly, splitting super does not immediately convert it into a cash asset. It remains subject to superannuation laws and usually cannot be accessed until the member spouse retires. In most cases, the super is rolled into the non-member spouse’s receiving super fund account, or another eligible superannuation plan, where it remains there until they are legally entitled to withdraw it. Unlike a property settlement, where a party may receive a lump sum of money or a direct transfer of an asset, superannuation remains preserved within the superannuation system until retirement age.
In some situations, a superannuation splitting order may permit the creation of a new super interest for the non-member spouse or require a payment flag to be placed on the account until certain conditions are met.
For self-managed super funds (SMSFs), the process can be more complex, with additional steps required to ensure procedural fairness, manage administrative costs and comply with the fund’s trust deed.
Is super split 50/50 in a divorce?
Under the Family Law Act 1975, superannuation is treated as property for family law purposes and can be adjusted, transferred or divided between parties.
Although different to other assets (as it is held in a trust), it is generally subject to the same principles:
All superannuation interests are taken into account, regardless of when they were acquired (before, during the relationship or after separation).
It is not automatically subject to a 50/50 division.
The Family Court of Australia or the Federal Circuit and Family Court will only make an order about superannuation if it considers it “just and equitable” to do so. This means the treatment of superannuation in a divorce or de facto relationship breakdown is highly fact-specific and requires careful consideration.
Superannuation and divorce: How is super split?
So now you’re left wondering, how is superannuation divided in divorce? There are varying approaches in respect to valuing and determining the division of superannuation assets in family law matters. While there is some case law which sets out the principles that apply when considering the division of superannuation, each case will be assessed based on its own particular circumstances.
Two-pool v global approach
You may have heard the terms “two-pool approach” and “global approach” being used in the context of family law property settlement matters and wondered what they mean. The two-pool approach, also known as the asset-by-asset approach, involves categorising assets into two pools. Looking at superannuation separately from all other assets takes into account factors specific to superannuation.
The two-pools approach can increase the complexity of a case and its use may not be advisable in certain circumstances. An example where the two-pool approach may be useful is where there is a significant amount of superannuation.
The global approach commonly involves applying the same percentage split to the totality of the parties' assets and liabilities.
Superannuation in divorce can be split in two main ways:
By agreement: through a formal written agreement, such as a Binding Financial Agreement. Both parties must receive independent legal advice and the document must meet strict legal requirements.
By court order: either by consent orders (where both parties agree) or by order of the family court after a contested hearing.
When the super has been split:
The non-member spouse may create a new super account in their name, either within the same fund or a different superannuation fund.
The payment may be rolled over into an existing super fund account of the former spouse.
A payment flag may be placed on the member spouse’s superannuation interest until a decision is made.
The funds remain within the super system until retirement or another condition of release is met.
Do you have to split superannuation in divorce?
Not necessarily, there are many different factors which influence the outcome of a final property settlement and what each party receives. Factors such as the duration of the relationship, each party's contributions to the asset pool and the relationship overall, as well as ongoing needs of each party. Other factors, such as the age and health of the parties, dependent children and the ability of each party to earn an income in the future will also have a significant impact. When considering the superannuation element of a family law property settlement, whether a party needs a cash asset could play a role in how superannuation is split. For example, if a party is closer to retirement age, it may be in their interests to retain as much of their superannuation as possible and divide other assets.
Understanding Superannuation Splitting with Self-managed superannuation funds (SMSFs)
For self-managed super funds, additional rules apply, and the administrative costs can be more complex. The superannuation fund trustee of an SMSF has specific responsibilities when implementing a payment split, ensuring compliance with the governing rules and legislation. The Omnia team can provide advice tailored to your individual circumstances if an SMSF is part of your property pool.
What factors will influence my divorce superannuation entitlements?
Every case is different. For example, one party may keep more of the superannuation balance while the other retains more immediate cash assets, depending on what is fair in their situation.
The court will consider:
Length of the marriage or de facto relationship.
Financial and non-financial contributions by both parties, including raising children.
Each party’s future needs, such as age, health, earning capacity and care of dependent children.
Whether a party is nearing retirement age and needs to preserve their super balance.
The overall property pool, including superannuation and other assets.
Clarifying Important Terms You’ve Been Reading About
Member spouse: the spouse who holds the superannuation interest.
Non-member spouse: the former or ex-spouse entitled to part of the super account.
Superannuation interest: the total value of a person’s super fund for family law purposes.
Super income stream: an ongoing superannuation payment, usually after retirement.
Payment split: the division of super between two parties.
Why You Should Seek Legal Advice
Superannuation is included in divorce settlements, and the laws around it are highly technical, with a process that requires procedural fairness. Whether you are negotiating directly with your ex-partner or involved in court proceedings, it is vital to seek independent legal advice from a trusted legal representative.
At Omnia Legal, we help you:
Understand your super balance and request information from the other party’s super fund.
Prepare the correct paperwork to seek consent orders or enter into a superannuation agreement.
Navigate the family court process if required.
Ensure your retirement savings are protected and divided fairly.
How can Omnia Legal Assist you?
We know that dividing superannuation can feel overwhelming, but you don’t need to go through it alone. Our compassionate family lawyers are here to provide clarity and reassurance at every stage.
Trusting our experienced family lawyers to discuss your matter is highly advisable, if you have any questions about how your superannuation, divorce proceedings or other personal circumstances will be affected, get in touch, we would love to help you!
If you would like to schedule an obligation-free complimentary phone consultation to talk through your options, call (07) 5415 0248 or email: info@omnialegal.com.au.
This article provides general information on legal topics for educational purposes only, and should not be considered legal advice or recommendations. While we have taken care to ensure accuracy, Omnia Legal is not responsible for any errors, and makes no guarantees about the accuracy or completeness of the information. Links to third-party websites do not constitute an endorsement, and we are not liable for any damages that may result from using inaccurate or incomplete information. It's always best to seek legal advice for specific situations.