Divorce and superannuation: How it works

Most of our readers would know someone who has gone through a relationship breakdown and divorce. These are typically stressful and emotional times where life-changing decisions need to be made around issues including parenting arrangements and the division of assets including the family home and bank accounts.

What can get lost in the early days of separation are the superannuation balances held by both members of the couple; an asset likely to be their most valuable outside the family home. Because our super accounts are locked away until retirement, they are often overlooked when couples divorce in favour of more readily accessible assets.

While that’s understandable, ignoring super can result in serious financial disadvantage in the long term, especially where one member of the couple has spent many years out of the workforce raising children or caring for family members, leaving them with significantly lower retirement savings held in super. According to an AMP-NATSEM study, divorced women with children had 37% less super than divorced dads from similar age groups and socioeconomic backgrounds, and 68% less super than married mums.

Background

Super is considered a marital asset, which means it can be divided between you and your partner if your marriage or de facto relationship breaks down and you permanently separate (including couples in same-sex relationships).

However, as super balances are held for our retirement and generally can’t be accessed earlier, specific rules need to be followed to ensure compliance with both Australian super legislation and family law. The upshot is that super balances are included in the combined wealth pool of separating couples but can’t be accessed as cash as they continue to be locked away for use in retirement and can only be withdrawn when we meet a condition of release.