Sep 10, 2021

Our Insights

When a marriage or de facto relationship breaks down, the separated couple must decide how to divide their assets through a property settlement. Superannuation is included in this process, but finding a clear and easy solution isn’t so simple.

Superannuation funds are not always top of mind, unlike other assets, and can easily be overlooked especially when trying to work through divorce proceedings without the support of a family lawyer and financial adviser. However, for most Australians, the amount of funds sitting in super accounts is no small thing.

So if you’re in the early stages of separation, or a long way down the road, here are some key considerations about how to handle your super.

Divide it up

Splitting superannuation is the most common approach separated couples take.

Although superannuation funds are held in a trust, they are treated as property. This means they can be given a value and then split.

You and your ex-partner, or the courts, decide the percentage split. You may be granted a super split or be legally bound to split it at the request of your partner.

Regardless, superannuation funds can't be converted into cash, and you won't be able to access it until the conditions of release are satisfied, such as when you reach your preservation age.

Decide later on

A separated couple can choose to put a flagging agreement on their super, which signals to the courts that they will deal with its division once the flag is lifted. An instance where this may occur is once retirement has been reached. There are potential drawbacks to this, particularly your circumstances may be significantly different between now and when the time comes to retire. It also might not provide the closure you desire - instead, it may be more beneficial to wrap up every aspect of your divorce so you can move on with your life. But again, you should seek professional advice about this.

Do nothing

The last option is to take note of the super account but to leave it as is. The superannuation funds of de facto couples in Western Australia often take this approach as their super cannot be split (a de facto relationship is one where a couple is not legally married but have lived together on a domestic basis).

There are many reasons why this could be a troublesome approach. It complicates your wealth strategy as you try to plan for retirement but still have an asset that hasn’t been settled with your partner. You’re also opening yourself up for disputes and other complications when it does come time to sort out your super. Not to mention the administrative mess and additional costs of potentially having multiple super accounts on the go.

How will the super be calculated?

There’s a lot at stake, and a lot of considerations; for example, it’s not just as simple as saying ‘I worked for a long time before I met my ex so I’ll get to keep most of my super’. There are many other factors.

Usually the separating parties and their legal teams will negotiate the superannuation split as part of the larger divorce settlement.

After valuing the superannuation, each party's financial and non-financial contributions will be considered. The Family Court also considers each person’s income, age and also if there are any children and other responsibilities.

It is highly recommended to work closely with a family lawyer and financial adviser through the process.

Seek professional help

Your superannuation strategy, and how you handle it through your property settlement, will have a big impact on your financial future. The separation process can be financially and emotionally taxing, so it is important to have access to qualified, professional legal and financial support.

Talk to the team at Calder Wealth Management to help you manage your evolving super strategy and help you get back on your feet, fast. Call us on (08) 8373 3333 to schedule your free initial appointment.

Written by Ben Calder at Calder Wealth Management.

This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek advice from a financial adviser and seek tax advice from a registered tax agent. Information is current at the date of issue and may change.