22 Sep Divorce and Superannuation – What You Need to Know
When your marriage or de facto relationship ends, one of the largest matters you’ll have to handle is the division of property. This is your property settlement. And in order to accurately divide the property, you and your ex-partner first have to accurately disclose everything that should be in the property pool.
Unfortunately, when emotions are high, parties are not always as forthcoming as they should be. And they may not always disclose all their assets as diligently as they should either. When it comes to superannuation, this has been particularly problematic. But a recent change in the law now makes this process much easier.
So, what are the ins and outs of divorce and superannuation? And how has the recent change in law impacted that process?
Divorce and Superannuation – What You Need to Know
When it comes to divorce and superannuation it’s important to get it right. After all, your superannuation could be one of your biggest assets. And it has a major impact on your future financial stability. Here’s what you need to know.
How is super treated under the Family Law Act?
When your relationship ends, your superannuation, and your ex-partner’s, is considered property under the Family Law Act. That means that your super contributions are factored into your property settlement, and will need to be split following the same principles that govern all property settlements.
In other words:
All superannuation is part of the property pool whether or not it was earned before, during or after separation.
It will not necessarily be split 50/50. But it will be split according to what is ‘fair and equitable’.
But superannuation also has some unique treatment under Family Law. This is because it is essentially an asset held in trust, with a superannuation trustee in charge of the fund’s assets. So the process for transferring, dividing or adjusting the super accounts will be handled by that trustee.
What are your options for splitting super on divorce?
When you split your super on divorce you can do it in three different ways.
BFA. You can enter into a binding financial agreement where you and your ex-partner agree to split superannuation in a certain way. If you go this route, you must sign a certificate declaring that all parties have received independent legal advice on the arrangement.
Consent orders. You can obtain consent orders where you and your ex-partner agree to split super in a certain way, and you then apply to the court for legal orders to be made by agreement.
Court order. You can obtain a court order that will determine how superannuation will be split.
In every situation, you should ensure you have expert family law advice so you can get the best outcome for you and your family.
What happens after you split your super?
There is another way that superannuation is treated differently from other assets in the property pool – splitting does not convert the super into cash.
Instead, once the split is agreed upon or determined by the court, if one partner is required to, they will split the amount remaining in their superannuation fund and make a payment to the other partner’s superannuation fund. This money then remains in the super fund and subject to all superannuation laws.
What if you have a self-managed super fund?
All super fund splitting can be technical, but splitting a self-managed super fund (also known as an SMSF) is even more so. In this case you will need to have a detailed analysis of the superannuation deed to determine if certain divisions of the fund can take place and, if so, how they can take place.
What if you have a defined benefit fund?
In a defined benefit fund, your superannuation benefits aren’t only determined based on your contributions or those of your employer. Instead your benefit may also rely on other factors, for example, your years of service with an organisation.
When it comes to splitting a defined benefit fund, there are different rules for calculating contributions and that means that there will be different ways to determine splits. It’s important that you speak to your accountant and lawyer and obtain advice about how it will be treated in a property settlement.
Disclosing your superannuation
In the past, it has sometimes been difficult to determine how much superannuation each party has to contribute to the property pool. This is particularly true when they aren’t being totally forthcoming. That is because information about a former spouse or partner’s superannuation assets had to be obtained by directly contacting the relevant super fund. If you weren’t aware of what super fund your ex-partner used, or if they had more than one, this was often a tricky process.
However, on 1 April 2022, the new Visibility of Superannuation went into effect. Under this new law, you can now request information about your former partner’s superannuation directly from the Federal Circuit Court and the Family Court of Australia (FCFCOA). Within seven days of receiving the request, the ATO will supply this information to FCFCOA who will then send it directly on to you, your former partner and your lawyers.
Divorce and Superannuation
When it comes to divorce and superannuation, it’s easier now to find and disclose the information that you need. However, splitting is as technical as ever. It’s important that you have the right team on your side – expert accountants and family lawyers – who can ensure that you’re getting the best possible outcomes for your situation.
If you’re preparing for a property settlement, get in touch. Toomey Family Law specialists have a huge depth of experience with superannuation and divorce disclosure.