Managing your superannuation in the midst of divorce proceedings can add another layer of stress onto an already complex situation. However, it’s imperative to plan for your future even while what that period may actually look like is in flux – which means dealing with the division of assets.
More than 40% of Australians with a superannuation fund have more than one account. A super is typically considered as property in the event of a relationship breakdown, and like any other asset it can usually be divided between partners by agreement or court order (except in Western Australia, where such assets cannot be split).
Before the proceedings get to far (or before you file, if you expect acrimony), establish new financial accounts that are solely in your name and shift your own ongoing financial gains, such as income, to be deposited into your new accounts. Take stock of all your financial assets, including debts, and prevent new debt being created in your name by cancelling shared credit cards. Also, if you haven’t already, use your Tax File Number to access and keep track of your superfund accounts.
At the time of a divorce or separation, you will typically have several options when deciding what happens to your superannuation benefits. You may:
Splitting a super does not automatically convert it into cash, and means you and your former spouse must both wait to access its funds until you satisfy a condition of release. If the super can be accessed, a mutual agreement or court order can help determine who receives what and in what form a partial withdrawal may be made to satisfy one party and an income stream be left for the other.
A flagging agreement can be made to allow discussion to resume about the super after retirement or another set life event, such as remarriage of one party. This prevents the super from being accessed until the flag is lifted.
Other assets may be divided differently to take into account the value of supers belonging to one or the other party. This can be useful if one party doesn’t want to involve the super, or for Western Australians who cannot split a super.
Even if your split is amicable, you should consider meeting with a lawyer to ensure your fair share of the super is protected, and that you are complying with the relevant laws. This is even more important if you have a self-managed superfund (SMSF.)
Do you need to know more about superannuation funds and TPDs? Talk to a member of our team at Gerard Malouf & Partners Compensation, Medical Negligence & Will Dispute Lawyers.