If you are planning on drawing on your superannuation after separating, beware of the potential issues
Although superannuation splits are common in family law property settlements, there is a difference between splitting the superannuation and applying for early release of the funds. In some circumstances, you will need your former partner’s agreement, and you will need to consider how a court will treat the withdrawal.
Superannuation splitting in family law
Superannuation is treated as property under the Family Law Act. Parties will need to provide evidence of the value of their superannuation entitlements. They have the option of seeking orders to split their superannuation interests.
However, splitting your superannuation does not mean that the superannuation can be drawn upon early. Any superannuation received from a property settlement is still subject to the rules of the superannuation fund, meaning that it cannot be accessed until the person reaches retirement age or meets other criteria for early withdrawal.
Although a superannuation splitting order requires superannuation to be transferred out of one fund, it must be transferred into another complying fund.
COVID-19 and early access to superannuation
Due to COVID-19, the federal government introduced a policy allowing eligible Australians to:
- Access their superannuation early, up to $10,000, before 30 June 2020; and
- Access to a further $10,000 after 1 July 2020
Thousands of Australians have drawn down on their superannuation funds to help to pay living expenses and other costs.
Things to consider
If you are separating and wish to draw down on your superannuation under the COVID-19 provisions, you should be aware of the following issues:
- You should notify your former partner that you are intending to draw down your superannuation. Even though the superannuation is held only in the name of one person, it is an asset of the relationship, and the other person may be entitled to a share. Drawing down on your superannuation will also decrease the joint asset available for distribution, so it is critical to notify the other person. Failure to inform the other party could be a material non-disclosure which would allow the other party to reconsider any settlement.
- If a court is satisfied that your use of the superannuation funds is wasteful, the funds can be notionally added back into your asset pool when the time comes for your property settlement. This means that a court may make a ruling as if you still have the money.
The final word
Superannuation is a difficult and complex part of family law. If you are thinking of accessing your superannuation early, contact us to find out how we can help.
This article was written by Senior Associate, Jessica Wynd.
DISCLAIMER: We accept no responsibility for any action taken after reading this article. It is intended as a guide only and is not a substitute for the expert legal advice you can receive from marshalls+dent+wilmoth and other relevant experts.