Superannuation and Relationship Breakdowns: What You Need to Know

When a relationship ends, whether it’s a marriage or a de facto partnership, there’s a lot to work through emotionally, practically, and financially. 

Among the assets that need to be considered is superannuation. While it’s often thought of as a “retirement-only” fund, super is treated as property under family law and can be divided when couples separate.

How Superannuation Is Treated

Superannuation is different from other assets like the family home or savings because it’s held in trust until retirement. 

However, the law recognises it as a vital financial resource and allows it to be split between separating partners. This ensures that both individuals’ future financial security is taken into account during a settlement.

Options for Splitting Super

There are a few ways super can be dealt with in the event of a relationship breakdown:

1. Superannuation Splitting Orders – Couples can make a formal agreement (through a binding financial agreement or consent orders approved by the Family Court) to divide super entitlements. This doesn’t mean withdrawing money, it means transferring or allocating a portion of one partner’s super into the other’s account.

2. Flagging Agreements – In some cases, the super fund is “flagged,” preventing it from being accessed or paid out until a future event, such as retirement. This is less common but can be useful where the value of super is uncertain.

3. No Split – Instead of dividing the super, couples may choose to offset it against other assets. For example, one partner keeps their super balance while the other receives a larger share of the property or cash.

Valuing Super

Accurate valuation is key. Some funds, like accumulation accounts, are relatively straightforward to assess. Others, such as defined benefit schemes or self-managed super funds (SMSFs), can be more complex and may require specialist valuation.

De Facto Relationships

It’s important to note that de facto partners have similar rights to married couples under Australian law. If you’ve lived together on a genuine domestic basis, the same rules for super splitting can apply when separating.

Getting Advice Matters

Superannuation splitting can be complex, and each case depends on the couple’s circumstances. 

Both legal and financial advice are strongly recommended. Lawyers can assist with drafting binding agreements or consent orders, while accountants and financial advisers can explain the tax and long-term retirement implications.

A relationship breakdown is never easy, but dealing with superannuation fairly is an important part of settling. Understanding your rights and obligations helps protect your financial future, ensuring that both parties can move forward with clarity and security.

Your accountant can be an invaluable resource during a relationship breakdown, find out how with a conversation with one of our team.

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