Superannuation Splitting Orders Explained

Superannuation Splitting Orders Explained

A superannuation splitting order sounds technical.

But the idea is fairly simple.

It is one formal way to deal with super after separation or divorce. It tells a super fund how a super interest should be split between the two people.

For example, an order might say that $80,000 from one person’s super is allocated to the other person. Or it might say that a percentage of a super interest should be split.

The important point is that a super split does not usually mean someone receives cash in their bank account. In most cases, the receiving person’s amount stays inside super until they meet a condition of release, such as retirement.

For the broader guide, start with Divorce and Superannuation in Australia: How Super Is Split.

Family law issues need legal advice. A family lawyer can help with the legal settlement and the wording of any orders. A financial adviser can help you understand what different outcomes may mean for your super, retirement, tax position and long term plan.

Key takeaways

• A superannuation splitting order is a formal order that tells a super fund how super should be split.
• Super can also be dealt with through a superannuation agreement in some cases.
• A split may use a fixed dollar amount or a percentage.
• The super fund usually needs to review the proposed wording before the order is made.
• A super split does not usually give the receiving person cash straight away.
• Defined benefit funds, pensions and SMSFs can make the process more complex.
• Legal advice is important before signing anything.

Quick answer: what is a superannuation splitting order?

A superannuation splitting order is a court order that directs how a super interest should be split after a relationship breakdown.

In plain English, it gives the super fund formal instructions.

Those instructions may tell the fund to allocate a fixed dollar amount to the other person. Or they may tell the fund to split a percentage of the super interest.

The person whose super is being split is often called the member spouse.

The person receiving part of the split is often called the non member spouse.

You do not need to remember those terms. The main thing to understand is this: the order tells the fund what to do.

You can read the Attorney-General’s Department overview here: superannuation splitting.

When might a splitting order be used?

A splitting order may be used when super forms part of the property settlement.

Common situations include:

• one person has much more super than the other
• super is one of the largest assets in the relationship
• both people agree and want formal consent orders
• the couple cannot agree and the court needs to decide
• one person is close to retirement
• the super interest is complex, such as an SMSF, pension or defined benefit fund

A splitting order is not always needed.

Sometimes super is left alone and other assets are adjusted instead. For example, one person might keep more super while the other keeps more home equity.

If your main question is whether super is automatically split equally, read Is Super Split 50/50 in Divorce in Australia?.

Superannuation agreement vs consent order vs court order

There are a few ways super can be dealt with after separation.

A superannuation agreement is not the same as a casual agreement between two people. It is a formal agreement and legal requirements apply.

Consent orders are court orders made when both people agree on the outcome. The main benefit is that the agreement becomes formal.

A court order may be needed if the parties cannot agree.

Before agreeing to the wording, make sure the super fund can actually process the proposed split. This is especially important for SMSFs, defined benefit funds and pension accounts.

Which option is best?

That is a legal question. A family lawyer can help you choose the right path and make sure the documents are drafted properly.

Base amount vs percentage split

A super split may use a base amount or a percentage.

These sound technical, but the ideas are simple.

What is a base amount?

A base amount is a fixed dollar amount.

For example:

This is only a simple example. It does not mean $80,000 is the right amount in any real case.

A base amount can be useful because it gives a fixed number.

But super balances can move before the split is processed because of investment markets, contributions, fees and insurance premiums. Your lawyer can explain how this affects the wording of the order.

What is a percentage split?

A percentage split allocates a percentage of a super interest.

For example:

Again, this is only an example.

A percentage split may be useful where the account value is likely to change or where the type of super interest makes a fixed amount harder to use.

This is one reason the wording should not be guessed.

Does the super fund need to be told?

Yes. The super fund usually needs to review the proposed order before it is made.

This is because the order affects the fund and how it administers the member’s super interest.

You may hear this called procedural fairness.

In plain English, procedural fairness means the trustee of the super fund gets a chance to review the proposed order before the court makes it.

The trustee is the person or company responsible for running the super fund.

For most large super funds, the trustee is the company that manages the fund.

For an SMSF, the trustees are often the members themselves, or a company controlled by the members. This can make SMSFs more complicated during divorce.

For more detail, read Divorce and SMSFs: What Happens to a Self Managed Super Fund?.

What happens after the order is made?

The exact process depends on the super fund and the type of super interest.

But the broad flow usually looks like this:

1. The order or agreement is finalised.
2. The super fund receives the required documents.
3. The fund checks the order and the member’s super interest.
4. The fund calculates the split.
5. The receiving person’s amount is transferred or allocated.
6. The money usually remains inside the super system.

The receiving person may be able to open a new account in the same fund. If not, the amount may be transferred or rolled over to another fund in their name.

A rollover means money is moved from one super fund to another super fund.

Can the receiving person withdraw the money?

Usually, no.

This is one of the biggest misunderstandings.

A superannuation splitting order does not usually turn super into cash.

If someone receives $80,000 through a super split, that amount will generally stay inside super. They usually cannot withdraw it unless they meet a condition of release.

A condition of release is a rule that allows you to access super. Retirement is the most common example.

There can be exceptions if the receiving person has already met a condition of release. But this depends on their age, work status, the type of super benefit and the fund rules.

What makes some super splits more complex?

Some super interests need more care than others.

An ordinary accumulation account is often easier to deal with. This is the common type of super account where the balance changes with contributions, fees, insurance premiums and investment returns.

Other super interests may be more complex, including:

• defined benefit funds
• self managed super funds
• super pensions
• annuities
• funds holding illiquid assets

Illiquid assets are assets that are harder to turn into cash quickly. Property is a common example.

For example, an SMSF that owns a commercial property may not have enough cash available to process a split straight away. The fund may need to sell assets, transfer assets or restructure.

That can create tax, cash flow and compliance issues.

If tax is your main concern, read Is Superannuation Splitting Taxable After Divorce?.

Common mistakes to avoid

Super splitting is much easier to deal with when the process is clear.

Here are the big mistakes to avoid.

Assuming the order gives someone cash

A super split usually keeps the money inside super.

This can improve someone’s retirement position, but it may not help their short term cash flow.

Ignoring the type of fund

An accumulation account, defined benefit fund, pension account and SMSF can all work differently.

Do not assume one set of wording fits every fund.

Forgetting insurance

Some people hold life, total and permanent disability, or income protection insurance inside super.

If the account balance changes, or if the person rolls to another fund, insurance should be checked.

Ignoring tax components

The tax free and taxable parts of super can matter later.

They may affect retirement withdrawals, estate planning and death benefits.

Signing without advice

This is the big one.

A super split can affect retirement planning for years. Get legal advice before signing, and consider financial advice to understand the long term impact.

You can read more about the advice side here: Superannuation Advice.

Final thoughts

A superannuation splitting order is not as confusing as it sounds.

It is a formal instruction that tells a super fund how to split a super interest after separation or divorce.

The harder part is getting the structure right.

Is the split a fixed dollar amount or a percentage? Has the fund reviewed the wording? Will the money stay preserved? Are there tax issues? Is there insurance inside the account? Is the fund an SMSF, defined benefit fund or pension account?

These questions matter.

A family lawyer can help with the legal order. A financial adviser can help you understand what the outcome may mean for retirement, insurance, tax and your broader financial plan.

FAQs

What is a superannuation splitting order?

A superannuation splitting order is a formal court order that tells a super fund how a super interest should be split after separation or divorce.

Can we split super without going to court?

In some cases, couples may use a superannuation agreement. Other couples use consent orders or court orders. You should get legal advice before choosing the right approach.

What is a base amount in a super split?

A base amount is a fixed dollar amount allocated from one person’s super interest to the other person, such as $80,000.

Does the money stay in super after a splitting order?

Usually, yes. The receiving person’s amount will generally stay inside super unless they meet a condition of release.