When thinking about a property settlement, have you considered what will happen to your superannuation during divorce? It is likely to be one of your major assets over your lifetime. Not considering the value of superannuation during divorce can severely impact your quality of life in retirement, especially if you have been a stay-at-home parent. It can come as a shock to the primary income earner to learn that he or she may have to split superannuation as part of the property settlement.
When finalising a property settlement, it’s important to understand how the law treats superannuation during divorce. The superannuation splitting law treats superannuation as a different type of property. It lets separating couples value their superannuation and split superannuation payments, although this is not mandatory. Splitting does not convert it into a cash asset – it is still subject to superannuation laws (for example, it is usually retained until retirement ages are reached). Each party takes a separate share of accrued superannuation assets, either by a transfer of money into a different fund, or into a separate account in the same fund.
Parties are encouraged to agree on the proportions of the split, with legislation supplying a default division of 50:50. There is a heavy emphasis on the promotion of private settlement of superannuation issues by the parties themselves.
However, the Family Court has some discretion to depart from an even split, in defined circumstances. These are:
- where the amount of superannuation is too small to divide;
- where there are multiple superannuation interests held by the parties;
- where it would otherwise be necessary to sell the family home and that would cause disruption the care of children;
- where it would be necessary to sell a business which would reduce the earning capacity of one of the parties.
If you are considering splitting superannuation during divorce, you should generally follow these steps: