Separation & superannuation

Wealth Management Insights

How do you start to map your financial future when your relationship ends? What are the first steps you need to take? What should you be prepared for? superannuation

These are the immediate questions. However, one of the commonly overlooked items on this list is what happens to the nest egg you already have, your superannuation. While it might be the last thing on your mind, your super is your future financial security and it’s important to consider how it will be treated along with the rest of your assets in the event of a relationship ending. 


How much of the retirement savings does each partner receive?

The rules regarding the exact amounts each former partner receives are quite complex and require legal advice from a family lawyer, and often a financial planner. While there are several ways to deal with super, there are specific superannuation splitting laws that can also be used. 

  • Payment split

This approach splits the superannuation fund benefit immediately and is the most common way of dealing with super after a relationship ends. If you aren’t yet eligible to withdraw your superannuation, the benefit will be split but remain in the super system. It is important to note, that your superannuation assets will be subject to Capital Gains Tax if sold. It is important to get advice on how to structure any settlement to maximise any tax benefits available. 

  • Payment flagsuperannuation and separation

If you are waiting on a specific event to occur, such as the maturity of a term deposit or an impending retirement, you can flag the super and determine the exact split when that event happens. Flagging allows you to protect your interest in the superannuation fund while you wait for the future event to occur, as interests subject to a flagging order cannot be paid out until a flag-lifting agreement has occurred.

  • No split or flag

Instead of splitting or flagging the superannuation account between partners, another option is to treat super as a financial asset along with all other relationship assets. This means that each partner's super savings is pooled and simply divided between each party, taking into consideration the value of the super savings. This is available to all couples but is the only legal option if you are dissolving a de-facto relationship in Western Australia.

Everyone’s settlements are different, and it essential to get the best expert financial advice to tailor the best solution for your circumstances. Savings now can result in significant differences in your final superannuation balance. Our expert guidance may make substantial differences to the quality of your retirement when you access your super.

For more information

If you need more information about how your separation can affect your superannuation, please contact your local RSM office.

 



This article has been prepared by RSM Financial Services Australia Pty Ltd ABN 22 009 176 354, AFS Licence No. 238282.

As everyone's circumstances are different and this article doesn't take into account your personal situation, it is important that you consider the above in light of your financial situation, needs and objectives, and seek financial advice before implementing a strategy.

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