Superannuation splitting may occur when a marriage or de facto relationship breaks down. It can be carried out via a court order or via an agreement, as long as it is in accordance with the Superannuation Industry (Supervision) Act 1993.
Most superannuation interests may be divided between the former partners, however, there are exceptions. They include superannuation payments made from a fund on compassionate grounds, payments made due to severe financial circumstances or for health reasons or superannuation interests under $5,000.
Partners wishing to divide their superannuation have several options to do so:
Splitting through a ‘payment’ or ‘interest’ split
The superannuation account can be split when a condition of release is satisfied. An interest split means each party receives a superannuation interest instead of a payment. This benefit can remain in the existing account or be transferred to another super fund.
Flagging the benefit to defer the decision until a later time
A “flag” ensures each partner’s interest is protected until a certain event occurs such as the retirement of one partner. When the specified event occurs, the value of the benefit will be known and the super fund’s trustee can execute the account as previously agreed between the parties.
Taking the superannuation into account but taking no direct action
The partners may take into account the value of the superannuation account and divide other marital property taking into consideration the value of the superannuation account. The superannuation funds are regarded as a “financial resource” that the fund holder will have access to in the future.