How is superannuation divided in divorce?

Divorce was once a rare occurrence, but these days everyone knows someone who has had a relationship breakdown.

Putting aside the emotional damage, usually the hardest part of a divorce after the agreements for custody is the division of assets.

We’ve all heard the stories of couples arguing over ridiculous items – including this particularly egregious judge-ordered division of Beanie Babies.

But if you are considering divorce or separating, there is often one asset that needs special consideration and can be vital to finalising a settlement, and that’s your superannuation.

According to the Attorney-General’s Department, while super is considered property is it treated differently to other assets because it is held in a trust, i.e. you can’t readily access it.

So splitting super doesn’t turn it into a cash asset, it’s still subject to superannuation laws. For example, it can’t be accessed until you have reached retirement age.

Dividing assets

Unless the two parties come to an agreement on their own, assets are rarely divided up 50:50. A lot of factors can come into force when the financial division of assets comes into play. They include children, how long you were together, personal financial and future financial expectations such as school fees or healthcare.

And it’s the same with super. However, there are also some exceptional rules for super that should be considered.

A good place to start when planning to divide your super is to calculate the total value of the superannuation.

You are entitled to ask your former partner’s fund for this information. If they refuse to provide it, you can apply to the Federal Circuit and Family Court of Australia or the Family Court of Western Australia to request your former partner’s superannuation information. This will be held by the Australian Taxation Office.

Accessing balances

You can make your request through the Commonwealth Courts portal.

It’s a good idea to provide as much information as possible about the other party. This makes it easier for the Australian Taxation Office (ATO) to track down the fund.

A response to the request should be available on the portal within seven days and is visible to all parties and lawyers involved in the legal proceedings.

However, the Family Law Court of Australia advises that balances provided by the ATO may not be up to date and petitioners can visit here for the complete set of forms to find out the current balance.

If you’re seeking a court order about your partner’s super, you must inform their super trustee/s accordingly. This provides your partner’s trustee/s with an opportunity to attend the court hearing and object to the order if they deem it necessary.

Then unless you and your partner can agree, you should seek legal advice to apply for a court order to divide up the super between the two parties.

Once this has concluded, send a copy of the agreement order to the super funds, who will then divide up the funds. Fees will usually be involved.

Self-managed funds

If you have a self-managed super fund (SMSF) it’s a bit more complicated.

If you are a trustee of the fund, legally you are expected to carry on your duties to act within the best interests of all members of the fund and continue to act in accordance with the law.

Industry Super Funds advises that you cannot:

• exclude another trustee from the decision-making process
• ignore requests to redeem assets and roll money over to another regulated complying super fund
• take any action not allowed by Superannuation Industry (Supervision) Act 1993 (SISA) or the SMSF’s trust feed.

Unless you are very sure about your legal abilities, you should obtain legal and tax advice about dividing the fund.

All assets will need to be valued, and while this can be carried out by a third party – an accountant, for example – it’s still a trustee’s responsibility to see it happens fairly.

If one member of the fund wants to leave the SMSF, the ATO provides a guide to leaving or winding up a fund here.

Choose carefully

Separated couples should carefully consider any agreement about super. In some cases, one party will accept the family house in lieu of any claim on the super. But often they then find they can’t keep up with the mortgage payments or maintenance costs.

You should also review any beneficiary nominations for your super. It’s a simple process that can be changed through your fund at any time.

Find free financial counsellors here.

And West Australian readers should take note, the rules have changed for superannuation for de facto couples in your state.

Previously super was not taken into account in a separation agreement for de facto couples, but in August 2022 legislation was passed to include it in any settlement. This brings it into line with all other states and territories.

Did you divide your superannuation when you separated from your partner? Was it an easy or hard process? Why not share your experience in the comments section below?

Also read: Do I have to tell Centrelink about my superannuation?