Superannuation is usually a significant asset that needs to be considered when a marriage or de facto relationship ends.
Under the Family Law Act, superannuation is considered as a type of property which can be divided or “split”, either by agreement between the partners or a “splitting order” by the Courts.
Couples can also make a superannuation agreement before or during their marriage or de facto relationship about how any superannuation will be split on marriage or relationship breakdown.
Generally speaking, there are three options when deciding what happens to your superannuation benefits at the time of a divorce or separation:
Splitting Superannuation by agreement or by order is the most common approach to Superannuation when a couple separates. Splitting directs the trustee of a superannuation fund to transfer part of a superannuation member’s benefit to the superannuation fund of their spouse. This transfer is known as a roll-over.
Splitting does not convert superannuation into a cash asset. It is still subject to superannuation laws in that it is usually retained until a party reaches retirement age.
Related Article: Matrimonial Asset Pool: How is it valued and divided?
Flagging defers the decision until another time, such as time of retirement. During the time the flag is in place, the benefit cannot be paid to the member. If the member meets a condition of release, the fund must notify the other party.
Note, you can only make a flagging agreement when the superannuation interest is in the growth phase. If the superannuation interest is in the payment phase, the superannuation splitting laws say that it is ‘unflaggable’.
Couples can choose to divide their other assets while considering the value of their super accounts but can decide to leave their superannuation benefits as they are.
Yes. If you don’t get legal advice the payment splitting agreement won’t be binding on the trustee of the superannuation fund.
One of the most important requirements is that, as with the more general financial agreements, each party must get independent legal advice about the agreement that they are considering entering into.
Note: The division of superannuation after a marriage breakdown is complex and unique to each case. This is general information advice only and does not constitute specific legal advice. If you would like further information in relation to this matter or other legal matters, please contact us on 03 9620 0088 or email [email protected]