What happens to superannuation in a divorce?
Navigating Superannuation Amidst Divorce or Separation
Experiencing a separation or divorce is an emotionally heavy phase, coupled with numerous impactful decisions that can shape your future. A decision of substantial importance is the handling of superannuation. Superannuation, a prominent asset, requires careful consideration during such unsettling times. This article aims to simplify the intricacies involved in managing superannuation amidst a separation or divorce.
- Superannuation as Property: In divorce or separation, superannuation is treated as a divisible property under the Family Law Act of 1975.
- Superannuation Splitting: Couples can value and split superannuation, but it remains bound by superannuation laws.
- Division Choices: Three main options exist for superannuation during divorce – splitting, deferring, or leaving it untouched.
- Self-Managed Super Funds: Superannuation splits involving SMSFs are complex and need professional guidance.
- Professional Advice: Seek early advice from experienced family lawyers like Edwards Moloney Family Law during separation.
Superannuation in Family Law
According to the Family Law Act of 1975 superannuation falls under the category of property, but it’s distinguished from other property types as it’s held in a trust. Therefore, it forms part of the divisible property pool during a separation or divorce. The Family Law (Superannuation) Regulations 2001 provide guidelines for the valuation of superannuation interests, the procedures for payment splits, and the information trustees are obligated to offer.
The law permits couples through separation to assign a value to their superannuation and divide superannuation payments. However, it’s vital to remember that such splitting doesn’t immediately convert it into a liquid asset. It continues to be regulated by superannuation laws, meaning it is usually retained until the retirement age is met.
Paths to Superannuation Division
When navigating superannuation during a separation or divorce, there are three primary options:
- Share the Super: Both parties may opt to split their super through mutual agreement or by court order. Yet, splitting doesn’t transform it into immediate cash. It remains bound to superannuation until a release condition is met, such as reaching the preservation age.
- Delay the Decision: You may choose to defer any decision concerning the super account until a specific event, like retirement. A flagging agreement facilitates this, barring the super fund from paying out of the superannuation account until the flag is lifted. This may be suitable if either party is part of a defined benefit account, where the superannuation’s value can be challenging to ascertain.
- Keep Super Unchanged: Partners may decide to divide their other assets and take into account the value of their super accounts, but leave the superannuation benefits untouched. This is especially viable for de facto couples in Western Australia, where their super can’t be divided.
Dealing with Self-Managed Super Funds
Property settlements involving self-managed super funds (SMSFs) can become complex. In case of an SMSF, it is crucial to engage with your super fund’s accountant at the earliest to ensure member benefits and financial statements are updated before initiating a splitting order or agreement. Updated valuations of the fund’s assets may be required.
Starting a new self-managed fund to receive the split benefit might not be cost-effective. Rolling the transferable benefit and the pre-existing member benefit into a retail fund could be a better alternative. Before deciding on splitting self-managed superannuation, parties with an SMSF should consult with a financial planner and an accountant due to the potential for high compliance and management fees.
Choosing the Optimal Approach
The superannuation splitting negotiation process is unique to each couple’s situation to ensure a fair and equitable outcome. A superannuation split must be viewed in the broader context of the overall property division. You are not compelled to split superannuation in a property settlement if it doesn’t suit your situation, particularly if both parties have comparable incomes and have accumulated similar superannuation levels.
Given the nuanced complexities and long-term implications of superannuation splitting, it’s highly advised to seek guidance from a seasoned family lawyer early in the separation process. They can offer advice suited to your unique circumstances and future objectives.
At Edwards Moloney Family Law, we have a dedicated team of professionals who understand the intricacies of superannuation and family law. We are committed to providing personalized advice that meets your individual needs. If you are experiencing a divorce or separation and need advice on managing your superannuation, don’t hesitate to contact us. You can reach out to us through our website or give us a call – we’re here to guide you every step of the way. Let us help you secure your financial future.
Divorce & Separation
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When married couples separate, there is only one ground for the grant of a Divorce Order, and that is the irretrievable breakdown of the marriage. This is established by the parties being separated for a minimum of 12 months. In some circumstances, parties can be living under the same roof and still be able to establish this ground.
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Edwards Family Lawyers can assist you and your spouse/partner to come to an agreement in relation to all financial matters and issues arising from the breakdown of a relationship, including the division of all assets and liabilities, spouse maintenance payments, superannuation splitting orders and child support departure Orders.
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Opportunities for negotiation and settlement exist not only before proceedings are commenced, but also after proceedings have been commenced and right up until the time that the Court finally hears and determines the matter. Parties can settle a matter at any time.
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The best interests of the children is the paramount consideration when determining the most appropriate and suitable arrangements for the children after a separation. At Edwards Family Lawyers, we encourage our clients to participate in the counselling or mediation services available to assist them to reach an agreement with their spouse/former partner
Edwards Family Lawyers offer Mediation Services to assist parties to engage in effective dispute resolution. Our Principal, Frances Edwards, has extensive experience in negotiating settlements in both parenting and property matters, and is a National Accredited Mediator and member of LEADR and IAMA.
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De Facto couples (including same sex couples) who separate after 1 March 2009 have the same rights as married couples. The rights and obligations of couples upon the breakdown of a Marriage or De Facto relationship are now all governed by the Family Law Act 1975. De Facto couples who separated prior to 1 March 2009 are still covered by the old State legislation
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