What happens to your super if your relationship ends?
If your marriage or de facto relationship ends, it usually has significant financial implications for both parties. What some people find surprising is that, if there is a financial settlement between couples, superannuation is treated as an asset and may be divided between the parties like any other assets.
According to Equip’s head of member relationships, Justin Sadler, ending relationships is one of those subjects that many members do not want to think about, or even consider might happen to them. It’s why fund members are often caught by surprise if it happens.
“Some are surprised to discover that the Family Law Act allows superannuation and super payments to be divided or split by agreement or court order,” he says.
If you separate from or divorce your partner, here are the main options you will have with regards to your super (or your superannuation pension):
- Super is split into two benefits – both parties receive a super interest in their own name.
- Super is offset against other property – it is not mandatory to split the superannuation interests. Super may be used to offset other property and assets that are being divided up between the ex-spouses.
- Super is “flagged” – the super interest is protected while the ex-spouses wait for a key event to occur, and the exact value of the benefit is known. This can occur, for example, if there are illiquid assets in the fund (such as a property held in an SMSF), or the like.
Once the super benefit has been split, it’s important to know that it does not automatically convert into cash, as all super assets are still governed by superannuation laws.
This means that in order to access super after a family law split, account holders need to meet a “condition of release”, such as retiring after your preservation age, starting a transition to retirement pension, or turning 65. Of course, if your super is already in a pension account, you have already met this condition.
“Family law can be very complex. We recommend you seek legal advice in order to fully understand your rights and obligations regarding any assets and property you own (including your super) should your relationship break down,” Mr Sadler says.
Note: Legislation applies to couples currently married, or divorced on or after 28 December 2002, or, if divorced prior to that date, to couples who haven’t finalised their property settlement. For couples in a de facto relationship, legislation applies if the relationship broke down on or after March 1, 2009. Same sex relationships are dealt with in the same way as all other relationships. All states and territories with the exception of WA have passed their power to dealing with the division of property for de facto partners to the Commonwealth Government.
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