Understanding Superannuation and Divorce Settlements

Understanding Superannuation and Divorce Settlements Split Easy Blog

Figuring out how assets are divided in a divorce in Australia isn’t always easy. After all, this isn’t always something that we’ll think about until the time comes to get a divorce. Additionally, financial settlements can be a very complicated thing. In some cases, a superfund transfer might be included. On the other hand, that isn’t always the case.

There are a lot of common misunderstandings out there about divorce and superannuation. For instance, some people think that superannuation is included as part of your financial settlement asset list. However, all debts and assets are included in the financial settlement. Additionally, it’s worth noting that your settlement will be based on the figures that are provided at the date of the settlement, rather than on the figures at the date of your separation.

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How Do People Reach a Settlement Agreement

With financial settlements, you will need to provide a statement of balance to the other person in the divorce, regardless of whether you’re using a superfund that you’ll manage yourself or not. The couple in a divorce need to work on a balance sheet to negotiate an agreement. If negotiations are protracted, liabilities and assets can decrease or increase. There may need to be a way of updating statements so that the balance sheet remains accurate.

Couples can sometimes negotiate to split a portion of their superannuation and other assets. If you agree to a split of the superannuation as part of your settlement, it’s important to understand that you will be unlikely to get this money in cash. Instead, the amount goes from one person’s superfund account to the other. If you’re at retirement age, then you might be able to access your superannuation.

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Points to Know about Superannuation Splits

If you need to access the cash in a superfund, then you might have some challenges to face. You will need to speak to the ATO directly to make sure that you know what your options are if you need to deal with problems like financial hardship after your divorce. Additionally, it’s worth noting that you should update your superfund manager and make sure that your beneficiaries are correct.

If you have a self-managed superfund, then things are slightly different. If you have one of these funds, then you may have already rolled your super into your account. Just like with standard industry funds, transferring funds to your spouse will require documentation and court orders. You will need to lodge the settlement at court and make sure that it is issued as an order, to ensure it is binding. Remember that the frank and full disclosure of information, in this case, will always be expected.

If a court finds out that you have lied about anything to do with your finances, then it’s likely that your court order will be overturned.

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.

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What will happen to my super during a divorce or separation?

Generally speaking, there are three options when deciding what happens to your superannuation benefits at the time of a divorce or separation:

  1. 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.
  2. 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.
  3. 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.
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One thought on “Understanding Superannuation and Divorce Settlements

  1. Wendy says:

    Negotiations for property settlement have been going for 5 Years, with ex ignoring draft consent orders sent a year ago by my lawyer to his.
    A high six figure wage earner, he has now decided to retire on medical grounds with a certificate from his doctor. At 62, he can access his super, as he has already done. As super is an asset, surely this can’t legally be accessed before consent orders?
    While I have been avoiding court as I am 60, a low wage earner, have a low super balance and can’t afford to waste money so close to my own retirement, what can I do to protect myself and my own future?

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