Retirement
Superannuation split: Processes and fees you need to know
Superannuation splitting is the legal division of superannuation interests as part of a separation settlement between married or de facto spouses. Married and de facto couples may apply for a superannuation split, but there are certain conditions they must meet to determine who gets superannuation in a divorce or separation.
Superannuation split: Processes and fees you need to know
Superannuation splitting is the legal division of superannuation interests as part of a separation settlement between married or de facto spouses. Married and de facto couples may apply for a superannuation split, but there are certain conditions they must meet to determine who gets superannuation in a divorce or separation.
Likewise, some processes for the splitting have fees that are payable by the super member, requesting party or both.
Nest Egg discusses the processes and fees you need to know in order to split superannuation when separating.
Who can split superannuation?
Both married and de facto couples may apply for superannuation split; however, they must meet certain conditions to be eligible.
Married couples
Married or formerly married couples may apply if their settlement agreements had not been finalised or settled by 28 December 2002 – when the superannuation splitting laws were enforced. Married couples are not required to file for divorce before applying for superannuation splitting, but they should have the intention to finalise their division of assets.
De facto couples
De facto couples may apply if they separated on 1 March 2009 or later for most states and territories, and 1 July 2010 or later for couples who are regionally linked to South Australian territories.
The superannuation splitting laws don’t apply to de facto couples from Western Australia at present; however, the federal and state governments agreed in 2018 to consider reforming the law.
What do you need to apply for a super split?
Applying for a superannuation split only requires a formal legal document that outlines how superannuation interests will be divided between the separating parties. The type of document and the processes it will involve will depend on the couple; however, there are some limitations to splitting depending on the super interest’s value.
Written formal agreement
The separating couple may draw up a written formal agreement that stipulates the conditions they agreed on after receiving independent legal advice with regard to the agreement.
As a rule, there must be at least three copies of the agreement to be distributed to the following:
- Two copies for the separating couple (one for each spouse)
- One copy for the superannuation trustee
This agreement doesn’t need to be submitted to the court unless one or both parties would prefer to have it turned into a court order.
Court order
The Family Court or Federal Magistrate Court may decide on how to split super interests in accordance with the Family Law (Superannuation) Regulations and enforce it through a court order if the couple can’t come to an agreement.
The court will first commence a valuation of the superannuation interest in question to determine if it can be split.
Valuation
If a couple wishes to split one or both of their super, they must first determine whether their superannuation interests have enough value to be divided.
General rules state that super account with a withdrawal benefit amounting to less than $5,000 or have an annual annuity amounting to less than $2,000 are considered unsplittable. In South Australia, however, these rules don’t include the Commonwealth Judges’ Pension Act Scheme and any other super scheme that covers judicial officers.
Note that valuing a super prior to drafting an agreement is not a requirement, especially if the member is sure that their super is not unsplittable.
What types of orders can the trustee execute?
There are different types of order that couples may request the trustee to execute, regardless of whether the superannuation split is a mutual decision or a request of one party. The fund member or their spouse may request the fund trustee to execute any of the orders below. However, note that fees may be payable for each type of request.
Request for information
This order is a request for the trustee to provide information about a member’s fund in order to valuate it in preparation for a superannuation split.
Payment split
A payment split request refers to the actual order for the trustee to split a member’s contributions and interest according to what is stipulated in the formal agreement or court order.
Payment flag
A payment flag prevents the trustee from paying its member any super interest until the flag is lifted. Payment flags are usually ordered in cases such as:
- The fund member will retire soon and there is a possibility that they will deal with the benefits unilaterally.
- The value of a member’s super is currently unknown but will be known in the near future.
Payment flags are legally binding to the trustee; however, it may only apply in circumstances where the fund isn’t in its payment phase yet.
Flag lifting
Flag lifting refers to the process of repealing a payment flag once the couple has reached a splitting agreement through either a formal agreement or a court order.
Flag termination
Flag termination is also known as a termination agreement. This typically refers to when both parties agree to end the flag order even without a splitting agreement. This would allow the trustee to make payments to the member when they reach a condition of release even if the couple has not agreed on how to split super interests yet.
Who pays the fees trustees charge for the split?
As previously mentioned, any requested order to the superannuation trustee may incur fees. The trustee may decide who between the couple will shoulder the fees.
Equal
Ideally, any fees incurred for any order or request as part of the superannuation splitting process are also split equally between the involved parties. However, some trustees apply different rules.
Member spouse
In some cases, the member is payable for any requests or orders directly or indirectly. That is, the trustee may charge its fund member directly or simply take the fees from the member’s portion of interest before or after the super is split.
Non-member spouse
The non-member spouse may also be charged for processes and orders they apply for. The trustee may also charge the non-member spouse directly prior to executing the order or indirectly by charging the fee from the non-member’s portion of the superannuation interest.
Seek legal advice
If you are in the midst of a relationship breakdown and wish to split your or your partner’s superannuation interest, Nest Egg recommends seeking independent advice from a legal professional.
This information has been sourced from the Attorney-General’s Department, Family Court of Australia and the Australian Taxation Office.
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