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Superannuation advice for couples facing breakup

Superannuation needs to be considered by couples when dividing assets after a breakup. It is usually the second biggest asset after the family home.

Divorce and separation often highlight a significant gender gap in superannuation, largely because women usually have primary custody of the children and choose to work-time, at least until the children reach secondary school age. This limits the amount of superannuation they will accumulate because our system is based on income- the more you earn, the more you accumulate.

Superannuation splitting laws enable couples to make a superannuation agreement about how any superannuation either party will receive will be divided. If an agreement cannot be not reached then a court order is made. As super is a future benefit, its division can be complex, particularly for defined benefits schemes that do not have an account balance.

Superannuation splitting provisions apply to all couples-married, de facto, and same gender. A splitting agreement specifies how to divide the account balance either at the operative time or at a time in the future. The operative time is 4 business days after the trustee is served with the agreement and the evidence of the relationship breakdown. The agreement must specify how the superannuation is to be split. This can refer to a specified amount or a percentage of the fund.

If you have difficulty obtaining information about your partner’s super, superannuation laws require trustees to release this information. This can include actuarial valuations for defined benefit funds. Nowadays the regulations provide a formula by which every superannuation interest can be valued as a lump sum to work out the split each ex-partner should receive. Trustees generally apply fees for providing information or calculating a lump sum. Most super can be split except where the balance is less than $5000.00 or for payments made on compassionate grounds or financial hardship.

The split does not have to 50/50, particularly when one partner may have more super through working full-time while the other partner was out of the workforce caring for children. Some women have to share their super with a former partner.

Get independent (that is, separate from your partner) legal advice on superannuation splitting agreements to make them binding on the trustee of the super fund.

Another (though less popular popular) approach is to flag or place a hold on your partner’s super account. The trustees cannot make payments while a flag is in place. The trustees are required to maintain contact with the future beneficiary (the former partner) who may not be a member of the same fund. Flagging arrangements do not stop partners from joining new funds or commencing their own funds.

Placing a hold or flag on a super fund is usually for interests in funds (usually defined benefit funds) where the value of a super benefit cannot be determined until a future event occurs, such as retirement or where a split straight away would be ill-advised for other reasons, such as taxation.

Once a superannuation agreement or court order is in place it over-rides any binding death benefit nominations in your super where you have nominated to the trustees of your super fund the person who will get your super when you die.

As soon as you know that separation is inevitable you should review any binding death nomination you have made with your super fund to ensure that your super goes to the people you choose, which probably won’t include your partner.