Separation raises many difficult questions, and for a lot of people one of the most pressing is what will happen to their superannuation (super). More couples are now separating later in life, with less time to rebuild, so getting this right matters. You may be wondering whether your super can be divided, how a property settlement could affect your retirement, and what happens to other assets such as an inheritance.
The short answer
Yes, your super can be divided. Australian Superannuation is treated as property under the Family Law Act 1975 (Cth), and it can be split between separating spouses, including de facto partners, either by agreement or by court order. It does not matter whose name the super is held in, and it is not off limits simply because one person earned it. As balances continue to grow, super can now be one of the largest assets in a property settlement, alongside the family home.
Super is part of the property pool
When dividing property, the court looks at each party’s financial and non-financial contributions, including caring for children and running the home. It also considers each person’s current and future circumstances, such as their age, health and capacity to earn an income.
This is becoming more significant. ATO figures reported in The Australian show the average super balance for Australians over 75 has risen 59% to $525,000 in less than a decade.[1] For couples separating later in life, one or both partners may have built a substantial balance over decades of work, and that balance is likely to be central to any settlement.
What about an inheritance?
An inheritance may also be taken into account in a property settlement. How it is treated will depend on the circumstances, including when it was received and how it was used during the relationship.
How a split works
A superannuation split moves a portion of one party’s super into the other party’s fund. The amount transferred usually remains preserved until the receiving party meets a condition of release, such as retirement, so it generally cannot be taken as cash. A split can be made by consent orders, a binding financial agreement or a court order, and the fund trustee is notified as part of the process to approve the wording of the super split.
Protecting your retirement
How assets are divided can affect each person’s eligibility for the age pension, which is subject to income and assets tests. To protect your position, obtain accurate valuations of all super interests, get financial advice alongside your legal advice, and review your binding death benefit nominations and your will once you have separated.
A common mistake to avoid
Many people fight hard to keep the family home at the expense of their super. But in some cases keeping only a home and no superannuation can leave you asset-rich and income-poor, with rates and maintenance to pay and no retirement income to cover them. Before agreeing to a settlement, think about how each option will support you in the future, not just today or consult a financial advisor.
How Nicholes Family Lawyers can help
If you are separating and want to understand how your super, or your former partner’s super, may be treated in a property settlement, our family law team can help. Contact us for advice tailored to your circumstances.
[1] Anthony Keane, ‘Surging Superannuation Balances Are Fuelling a Rise in Disputes over Inheritances and Divorces. Here’s How to Help Avoid the Drama’, The Australian