Superannuation division in Australia is becoming far more common for separating couples, both married and de facto.

 

Why?

 

Because compulsory employer contributions to super commenced in 1992 and both males and females in the workforce have built up much larger superannuation balances which are treated as an asset upon separation.

 

This article deals with four very common questions that arise about superannuation when a separation occurs.

Table of Contents

WHAT IS A SUPERANNUATION SPLIT?

Does my spouse get half my super in a property settlement

A superannuation split is the division of super funds between the parties after separation has occurred.

 

Superannuation, like a house, is an asset of the parties capable of being divided as part of the division of assets overall.

 

As a practical example, it may be the case that one party will retain the former matrimonial home and the other party retain their superannuation and no division of superannuation occurs.

 

However, the parties may elect to add the total superannuation held by both of them then do an adjustment so each party will keep an equal amount of super going forward.

 

Dividing superannuation between couples is a little bit tricky.

 

It is necessary to prepare a Consent Order document to be filed with the Court or alternatively prepare a document called a Binding Financial Agreement which requires both parties to have independent legal advice setting out what is happening with the superannuation and usually the other property and debts of the parties.

 

Also, when there is a superannuation division, the super fund who was transferring money will need to give their permission/consent to the wording used to divide the super and check there is available funds so that the amount agreed can be transferred.

 

If one party has multiple superannuation accounts, you can transfer super from more than one account to the other party to reach the total amount agreed.

IS SUPERANNUATION SPLIT 50/50 IN A DIVORCE OR SEPARATION?

Couple in mediation

The simple answer to this question is that an equal division can be agreed but it is not compulsory do so.

 

There are several reasons why an equal division of superannuation may not occur.

 

For example, one of the parties may be close to retirement and wish to access their superannuation – this may mean that they give other assets such as the house or motor vehicles to the other spouse so that the fair distribution occurs.

 

Also, in a shorter relationship one of the parties may have had a large amount of superannuation when the relationship commenced – in these circumstances it may be fair for that party to retain a larger proportion of their original super when dividing all the couple’s assets and liabilities.

 

It is important to prepare an asset and liability table (with values) when separated and look to work out a fair division of assets.

 

The parties can then consider other important factors – such as length of relationship, what valuable assets did either of them have when the relationship commenced, whether any lump sums were received by either party such as an inheritance during the relationship and lastly the future needs of the parties including income difference or care of children, when working out a fair “split” of all assets including superannuation.

DO YOU PAY TAX ON A SUPERANNUATION SPLIT?

How do we calculate super during a property settlement.

The answer is there is generally no tax payable on a division of superannuation.

 

In other words, if the parties agree to transfer to the wife $100,000 of the husband’s superannuation when they had separate (and then prepare a Consent Order to be filed with the Court) no tax will be deducted from that division or split and the entire $100,000 will be paid into the wife’s nominated superannuation account.

 

Tax can apply to superannuation however this is usually when it is to be drawn down on retirement or permanent disability OR tax can be applicable when superannuation monies are first contributed to the super fund.

 

Overall, in working out a fair amount of super to be divided between the parties, looking at the super balance you do not need to take tax into account.

HOW MUCH SUPER DO YOU SPLIT WITH YOUR SPOUSE?

Super splitting assets

The answer is – it depends.

 

As noted in the 50/50 question above, there are a wide-ranging number of key factors which will determine both how much superannuation could be split but also whether other assets could be used instead of superannuation to reach a fair arrangement.

 

Quite commonly when couples who separate are closer to retirement age, it may be appropriate that they both end up with approximately the same amount of superannuation.

 

However, for younger couples particularly those who are still raising children, it may be much more important for one of them to retain the former matrimonial home in order for the children to continue to reside at this home – with the other party keeping the bulk of their superannuation offset against the equity in the house.

 

As a practical example, if a husband-and-wife separate but have two children aged under 10 years they may decide that the overall assets will be divided 60/40 in favour of the wife.

 

If they have $300,000 equity in their home and the husband has $200,000 in superannuation, then to reach the 60/40 division the wife may retain the house and all of the equity(60%) and the husband retain his superannuation(40%) so that they can both move forward and the wife can continue to live in the house with the children.

 

A similar example and adopting the same assets and values could be that the relationship was only for 10 years, and the husband had the bulk of his superannuation before the commencement of the relationship.

 

They may agree to divide the assets 50/50 and to have that occur the wife will need to give the husband $50,000 in cash so that she can keep the house the husband will retain his superannuation of $200,000 plus the $50,000 payment to make up his 50% share.

 

You can see that there are many different scenarios and potential outcomes when dividing superannuation.

 

If there is any doubt, then making a fixed fee appointment with an experienced family law solicitor can give some preliminary guidance as to what a range of outcomes on a percentage basis may be AND in practical terms what assets can be retained and transferred by each party to reach that percentage.

 

Depending on the co-operation of the parties, it may then be possible to have direct discussions to reach a sensible agreement.

 

The agreement reached can then be documented by a Consent Order or Binding Financial Agreement.

MOVING FORWARD

Super Split Online Staff

Resolving the division or splitting of superannuation is one of the most important steps in reaching an overall fair division of the assets and liabilities of a couple who separate. If you would like to look in more depth at this topic then read our article HOW SUPERANNUATION IS SPLIT IN A DIVORCE

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