Key takeaways
- Understanding Superannuation in Divorce – Superannuation is considered an asset in divorce proceedings
- Keep Records of Contributions – Maintain comprehensive records of your contributions
- Consider a Financial Agreement – Consider drafting a Financial Agreement with legal assistance
- Engage a Family Lawyer – Divorce rates are low among older people, but are rising
- Understanding your Superannuation Valuation – Seek an independent valuation of your superannuation funds
- Tax Implications to Consider – Be aware of tax implications related to your superannuation during divorce
When you file for divorce, there’s no denying it can be emotionally taxing. And in the turmoil of figuring out your asset pool, mediation, and child support, you might overlook a crucial aspect of your financial assets – superannuation. In Australia, superannuation is often classified as property. This means it is another thing that can be divided between two parties when they get divorced. Because of this, it’s essential to understand how to protect superannuation in divorce. That’s why we’ve put together this guide of practical steps to ensure that your retirement savings remain protected during the challenging time of getting divorced.
Understanding superannuation in divorce
In Australia, superannuation makes up part of the asset pool during a divorce. According to the Family Law Act 1975, superannuation can be divided between partners just like any other asset. Unlike other property, however, superannuation is held in a trust, and cannot be accessed until retirement or preservation age. Generally, this means that if you’ve accumulated superannuation during your marriage, your spouse may be entitled to a portion of it upon divorce. Your partner needs to be under 75 to receive after-tax superannuation contributions from you. This can lead to financial difficulties in the future, which is why understanding your rights and entitlements is important if you want to get the right settlement.
To learn more about superannuation and property settlement, refer to the Family Court of Australia’s website.
Keep records of contributions
Monitoring your super contributions is one of the best ways to protect your superannuation in divorce. This includes both employer and personal contributions. An easy way to manage your superannuation is by using the Australian Taxation Office online through myGov. Ensure you have the date and amount for every contribution. Records can be particularly important in establishing the value of your super before your relationship begins, which could be useful when you start negotiations. If you have been a full-time carer with much less superannuation than your spouse, then you are also entitled to a share of your partner’s superannuation.
Consider a financial agreement
A Financial Agreement allows couples to determine how their assets, including superannuation, will be distributed in their divorce. Having a family lawyer draft a financial agreement is the best way to ensure that both parties fully understand and agree to the terms. Financial Agreements can help protect your superannuation from division if executed correctly.
Using a family lawyer
It can be intimidating to navigate the intricacies of Australian Family Law when protecting superannuation in divorce. Speaking with a knowledgeable family lawyer can help you understand your rights and safeguard your superannuation during a divorce. A lawyer will help you understand your legal obligations and entitlements, such as the potential division of your superannuation or that of your partner’s, and advise you on the best approaches to secure your financial future.
The costs of getting divorced soon add up, but you should never have to compromise on protecting superannuation in a divorce just because you’re worried about fees. So, if you want to know more about the different ways you can fund the cost of legal fees, check out the specialist legal finance options at JustFund.
If you want to know more about discussing legal fees with your lawyer, check out our blog post here.
Understand your superannuation valuation
Both parties should seek an independent appraisal of superannuation savings during a divorce. With different growth rates and investment risks, different types of superannuation accounts have varying values. Knowing your superannuation’s current and projected value helps you out in divorce negotiations and ensures you and your ex-partner receive a fair outcome, empowering you to make informed decisions about your financial future when you’re protecting superannuation in divorce proceedings. A superannuation valuation is especially important for getting a fair outcome when you care for children.
You should know that funds in a defined benefit fund may require a specific valuation approach compared to retail super funds. The Australian Securities and Investments Commission (ASIC) has helpful resources about different types of super funds.
Superannuation splits
During the divorce process, if you and your spouse can’t form an agreement, the court may mandate a superannuation split if you and your partner cannot reach an agreement in the divorce process. This means that, as part of your property settlement, the courts would move a certain amount of your superannuation to your ex-spouse’s superannuation fund.
This has a major effect on your future fund growth and retirement planning. Documentation for a superannuation split may include filling out a Superannuation Information Form with an outline of the amounts involved and your affected funds. Superannuation may even factor into an overall asset split.
Tax implications to consider
Your superannuation is subject to certain tax regulations, which will be different depending on your age and the conditions under which you withdraw your superannuation. For example, you have tax-free withdrawals if you’re over 60. You also usually pay 15% on superannuation contributions.
Understanding these tax implications during a divorce is crucial. Accessing superannuation before reaching your preservation age – 55 to 65, depending on the year you were born – means a higher tax penalty. Make sure to engage with a family lawyer who understands the tax implications of superannuation in divorce so that you can plan in accordance.
Find out more about superannuation tax on the ATO website.
Don’t let the tax implications of paying superannuation put you off. Get a line of credit from JustFund to cover your fees and achieve the divorce settlement you want without worrying about the need to pay up right away.
Conclusion
In summary, protecting superannuation in divorce or knowing your entitlement to an ex-partner’s fund requires meticulous preparation as well as full awareness of your rights and options. When you understand how superannuation affects property settlement and your financial agreements, you can safeguard your superannuation retirement savings for your future retirement goals.
If you’re ready to discuss superannuation and other aspects of a divorce settlement, reach out to us today. You can get in touch with us using our form, email us at enquiries@justfund.com.au, or call us at 1300644980 to schedule a consultation. During this consultation, you can discuss your situation, the potential role of a family lawyer and anything else you might need when protecting your superannuation in divorce.
