What happens to super during a divorce?
We all know the importance of superannuation and saving for retirement. But what happens to that hard-earned super if you’re going through a divorce?
Firstly, it’s important to remember that superannuation is defined as “property” under the Family Law Act and can be counted as part of a property settlement.
Getting information
To overcome problems that were arising with non-disclosure of superannuation information by some divorcing spouses, the Federal government stepped in and from April 2021 has enabled the Australian Taxation Office (ATO) to be able to release details of a person’s superannuation information to the Family Court. This is to ensure there is procedural and economic fairness in divorce proceedings to stop under-reporting of super assets; and it allows anyone to receive up-to-date information from their ex-spouse’s super fund.
Options
There are options available as to how Super can be dealt with in a property settlement. When a couple goes their separate ways, the super balances of each person may remain the same, with each one taking their respective entitlement from the asset pool, or the super may be split between the couple.
Superannuation fund splits can be done in any percentage and it does not have to be equal between the parties involved. For superannuation to be split, there must be:
- An order from the court; or
- A superannuation agreement, which is a financial agreement that deals with superannuation interests
Split super accounts
If a superannuation account is split, it does not convert into cash unless the receiving spouse is aged 65 years or over, and has retired.
In most cases, the superannuation is immediately rolled over into the receiving spouse’s superannuation account and remains there until they are legally able to access it.
Self-Managed Super Funds (SMSF)
For self-managed superannuation funds, generally a SMSF cannot acquire assets such as residential property from a related party, but there is an exemption when the acquisition is a result of a marriage breakdown.
If a residential rental property is involved, the superannuation rules allow a rollover under a court order or financial agreement rather than forcing the former couple to sell the property.
Where a couple have a SMSF together, it’s common for one member to step down when they divorce – until that point, it’s important to remember that the trustees are legally obliged to act in the best interests of all members.
What type of funds can the court deal with?
The Family Law Act specifically defines the type of superannuation policies it can deal with:
- A superannuation fund within the meaning of the Superannuation Industry (Supervision) Act 1993 includes those in the public and private sector
- Self-managed superannuation funds
- An approved deposit fund
- A retirement savings fund
Values
Caution must be taken with regard to the value to be attributed to a superannuation fund. It is not as easy as just looking at the latest statement. All funds are not the same and therefore the process for determining value is also not the same. Specialist advice should be sought.
Overseas Super
The Family Law Act does not have the jurisdiction to deal with overseas superannuation policies or overseas pension funds.
With superannuation becoming increasingly significant in Australia, it is important for parties to be aware of the legal avenues available to them under the Family Law Act to preserve a superannuation interest pending final property orders.
It is also essential that superannuation is considered in a property settlement and that you obtain Specialist Family Law advice. For a fixed cost initial appointment contact us on (07) 3221 4300 or email us: [email protected]
