Divorce or separation can be extremely difficult. On top of the emotional stress, it can be overwhelming keeping track of everything. However, planning for your future remains more important than ever, and that includes managing your superannuation.
When people separate, they usually need to sort out how to divide their assets (property) and debts. There are various ways this can be done:
- you and your former spouse or de facto partner can agree on how your property should be divided without any court involvement
- if you agree on arrangements, you can seek to formalise your agreement by applying for consent orders in the Family Court, or
- if you cannot reach an agreement, you can apply to a court for financial orders, including orders relating to the division of property and payment of spouse or de facto partner maintenance.
If I’m in the middle of a divorce or separation, what should I do first?
Every divorce or separation is different, and each of them come with their own set of challenges and required you to do a lot of short-term and long-term planning during a time that will often be emotionally draining.
To protect your financial future, you should first take stock of all your financial assets (including debts). You should also prioritise establishing new financial accounts that are solely in your own name to protect ongoing financial gains, such as your income.
It will also be important to prevent debt being created in your name by cancelling shared credit cards and having your details removed from any bills or rent agreements that you are no longer responsible for.
What will happen to my super during a divorce or separation?
Super is categorised as property in the event of a relationship breakdown, so like any other asset it can be divided between partners by agreement or court order. This includes marriage or de facto relationships, both heterosexual or same sex. The rules do not apply to de facto couples in Western Australia.
How is super divided?
A superannuation agreement can be put in place before, during or after your relationship, as part of a broader ‘binding financial agreement’. This agreement can specify how super is to be split upon separation or divorce.
If you and your partner don’t have a binding financial agreement in place already but have agreed how you would like super to be split, an Application for Consent Orders can be filed in court without your attendance to formalise the arrangement you’ve both come to.
If you can’t come to an arrangement together, you might instead look to obtain Financial Orders, under which a court hearing will determine how super is to be split between the two of you.
Because there are rules around when super can be accessed (for instance, you may need to have retired from the workforce), remember that splitting super won’t necessarily result in an immediate cash payout, as super is treated differently to other assets and debts.
What happens to a self-managed super fund?
If you or your partner are in a self-managed super fund (SMSF), the members of the fund are its trustees. The valuation of your super should be determined by an accountant or actuary in this situation, as SMSF trustees normally don’t have the financial expertise to make accurate fund valuations.
Splitting super – what to keep in mind
Some people prefer to avoid lengthy disputes by choosing to forgo some of their entitlements.
The trouble with doing this is that it may have significant financial consequences down the track, so it’s important to be armed with all the information you can to ensure the decisions you make are sound.
Working out what you’re entitled to can be complicated, which is why it’s important to seek legal advice, and regarding other financial matters, you may want to speak to your financial adviser.