December 02 2024
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Relationship breakdowns can be an emotionally challenging time. But it can also deliver a financial blow, which is probably the last thing you need in this season of life. Let’s explore how divorce and super works and what happens when you both can’t agree on how it should be split.
Before we dive in, it’s important to note that this article only focuses on super splitting and doesn’t consider the management of non-super assets (that includes the valuation of assets).
How divorce and super works
When a marriage or de facto relationship breaks down, super is generally factored into the pool of assets that may be divided between parties under the Family Law Act 1975 (Cth). Different rules may apply in different states and territories (this is particularly the case if Western Australian law applies to you or your ex-spouse), so you should seek your own legal advice on which rules apply to you, depending on your individual circumstances and where you live.
If you can’t reach an agreement, the court can generally determine a settlement for you. While the super pool held by two parties is considered ‘joint property’, keep in mind that super is not always split 50/50 in a divorce. The Family Court will consider what is fair and equitable for both partners, and look at factors like:
- Super contributed during the marriage
- The capacity after the marriage
- Any care or commitments to children or dependants
Unlike other assets, you’ll generally not see super paid out as cash in a divorce. It is still subject to the same conditions of release and preservation laws before it may be accessed.
Important fact
Contributions made by stay-at-home parents who may have not worked for some years are generally considered by the court.
How superannuation is valued
Super should be factored into any asset evaluation that takes place during a separation. Before super can be split, the total value of super is typically calculated for both parties.
Depending on your situation, you may be able to either apply to the court to request information about the value of super held by the ATO or contact the trustee of your ex-spouse’s super fund. For the latter, you can find more information on the Superannuation Information Kit on the Family Court of Australia website.
Before making a decision, you should get legal advice about which option might be best for you.
Methods of splitting
Separating couples may typically split super by:
- Agreement: Entering into a formal written agreement on how to split the super. In this instance, separating couples would engage with a lawyer, who must sign a certificate stating that independent legal advice has been provided.
- Court order: Seeking an order of the Federal Circuit and Family Court of Australia or Family Court of Western Australia (whichever applies to your situation) in two ways:
- Consent order - by agreement or consent of the parties; or
- Court Order - when an agreement cannot be reached. If you decide to seek court orders about superannuation, other conditions must be met (including notifying the relevant super fund trustee at specified times).
To understand these methods in more detail you can visit the Family Court of Australia website. We recommend that you seek your own legal advice on which option might be best for your situation, and any steps that are required to fulfill the requirements for each splitting method.
Types of court orders
A super splitting order will outline how much of the super balance will be transferred from one party to the other. It can be a percentage or a fixed amount, as specified in the order.
A super payment flag (flagging order) may be put in place if there's a concern that one person might try to take money out of their super before everything has been fairly split up - especially if one person is close to meeting the conditions of release for their super.
Instead of splitting the super immediately, the court may put a hold (or ‘flag’) the super interest until a court order is made to remove the flag, or a flag lifting agreement is served on the trustee of the super fund. When the relevant requirements have been met, the super is managed according to the terms of the payment flag.
Important fact
If you or your partner already have a super income stream, this may be paid as a lump sum. For more detail on super splitting with a super income stream, please visit the ATO’s website.
Transferring/rolling over from one account to another
When it comes time for super to be split, a super fund may let the non-member spouse open a new super account for themselves in the same fund, where the fund may transfer the owed super amount into.
If not, the super fund may transfer or rollover the interest to another super fund for the non-member spouse.
You can always contact the relevant super fund trustee for more information.
FAQs
Do you have a divorce and superannuation calculator?
No, Rest does not have a divorce and super calculator, as determining how super may be split in a separation is very specific to your financial circumstances and needs. It’s best you seek your own legal advice on any valuations and other steps that you may need to take.
Is super split 50/50 in a divorce?
No, super is not typically split 50/50 as it is not usually your standard cash asset. The Court will consider a range of factors when determining how to split super in a divorce, such as how much super was contributed in the relationship, capacity after the relationship and any dependents.
How long after a divorce can you claim superannuation?
If you are applying for a super splitting order, you must generally do so through the courts within 12 months of your divorce order. If you apply later than that, you may still apply for the leave of the court, but you must demonstrate to the court that without this you’ll face financial hardship.
