What happens to super in a divorce or separation?
Divorce or separation can be extremely difficult. On top of the emotional stress, it’s often quite overwhelming to keep track of everything. However, planning for your future remains more important than ever, and that includes managing your superannuation.
If I’m in the middle of a divorce or separation, what should I do first?
Divorce is challenging, but it be might be more common than you realise. In Australia, around 50,000 divorces are granted every year. The average length of a marriage prior to divorce is 12 years, and nearly 50 per cent of cases involve children.
However, every divorce or separation is different, and each of them come with their own set of challenges. Remember to be kind to yourself and never hesitate to ask for help. You’ll need to do a lot of short-term and long-term planning during a time that will often be emotionally draining.
To protect your financial future, you should first take stock of all your financial assets (including debts). At the same time, establish new financial accounts that are solely in your own name to protect ongoing financial gains, such as your income.
You should also prevent debt being created in your name by cancelling shared credit cards and having your details removed from any bills or rent agreements that you are no longer responsible for.
As part of your financial stocktake, you should have all of the details you need to access your super fund account. If you’re still unsure about your super fund details, you can use your Tax File Number to register an account with myGov to keep track of your accounts.
Of all Australians with a super account, 40 per cent have more than one account, which goes to show that super can be difficult to track, even at the best of times.
There will be a lot of financial challenges that lie ahead and it’s okay to feel as though you’re not keeping up with everything. To help, the Australian Government’s MoneySmart website provides a detailed checklist that you can use to keep track of money during a divorce or separation.
What will happen to my super during a divorce or separation?
Essentially, super is considered as property in the event of a relationship breakdown, so like any other asset it can be divided between partners by agreement or court order. This includes marriage or de facto relationships, both heterosexual or same sex. The rules do not apply to de facto couples in Western Australia.
Generally speaking, there are three options when deciding what happens to your superannuation benefits at the time of a divorce or separation:
- Split the super. If you separate or become divorced, you and your ex-partner may split your or their super by agreement, or by court order – the same way as many other assets. Splitting super does not convert it into cash. It is still subject to superannuation preservation laws and must remain in superannuation until you satisfy a condition of release, such as by reaching your preservation age. Check when you can access your super here.
- Defer your decision until another time, such as retirement. A couple can choose to wait for an event (such as retirement) to occur before dealing with the super account by making a flagging agreement, which prevents the super fund from making a payment out of the superannuation account until the flag is lifted. This approach is not often used, but might be appropriate if you or your ex-spouse are in a defined benefit account, where it is more difficult to determine the value of the superannuation. You may also ask for a payment flag to be placed on you and your ex-spouse’s accounts, particularly if one of you is approaching preservation age, to prevent any withdrawals being made before matters are settled.
- Take super into account but leave untouched. A couple may choose to divide their other assets while considering the value of their super accounts but can decide to leave their superannuation benefits as they are. De facto couples in Western Australia may choose to take this approach, as their super cannot be split.
What’s the most common approach?
Splitting super is the most common approach for managing super during a divorce or separation, which typically follows these steps:
- Calculate the total value of superannuation. You need to know how much is in your ex-spouse’s super account(s). You are entitled to ask their fund(s) for this information. You will need to fill out a form from the Family Court of Australia website.
- Seek legal advice and reach an agreement, or if you can’t agree, then apply for a court order. Many things may be taken into account when determining how super will be split, for example, non-financial contributions to the relationship such as taking care of children. A court may also consider the financial position each of you will be in after the divorce or separation.
- Send a copy of the agreement or order to the super fund(s).
The rules relating to dividing superannuation assets in the event of a relationship breakdown are complex, so even if your split is amicable, you should consider meeting with a family lawyer to ensure you’re complying with the relevant super laws and to protect your fair share of super.
Super funds may charge fees for the administrative costs associated with actioning requests, such as:
- a payment split
- a payment flag
- flag lifting
- an order terminating a payment flag, or
- an application for information.
What happens to a self-managed super fund?
If you run a self-managed super fund (SMSF) and you’re separating from your spouse, then your situation is more complicated, especially if your ex-spouse is also a trustee of the SMSF. The breakdown of your relationship does not absolve you from your responsibilities as a trustee. Trustees must continue to act in the best interests of all members at all times and must continue to act in accordance with super laws.
- Exclude another trustee from the decision-making process.
- Ignore requests to redeem assets and roll money over to another regulated complying super fund.
- Take any action not allowed by Superannuation Industry (Supervision) Act 1993 (SISA) or the SMSF’s trust feed.
The best thing to do is to obtain legal advice.
Review your beneficiaries
When your marital circumstances change, it is important that you review your beneficiary nomination for your super. You can usually change your nomination at any time.
Who can help?
If you require legal assistance, MoneySmart lists community legal centres and legal aid agencies that can offer free legal advice .
Divorce and separation are difficult, life-changing events. Surround yourself with supportive friends and family, make a plan for your future and never hesitate to ask for help.
Contact your Industry SuperFund for more information:
The information provided in this article is general information only and does not take into account your objectives, financial situation or needs. Before making a financial decision, please assess the appropriateness of the information to your individual circumstances and consider seeking professional advice.