Money and Life
(Financial Planning Association of Australia)
By the time you retire your super may be one of your biggest assets. So when it comes to a divorce, it’s a very important part of a financial settlement. Find out from legal and financial experts what you need to know, and what to keep in mind when it comes to super and separating your family finances.
Splitting your financial assets during divorce is often a complex and difficult process. In the first in our series of features on sorting out money matters after a relationship ends, we take a look at super.
Just how important is my super?
As something that many of us won’t actually benefit from for many years, super can end up taking a back seat in the settlement carve-up. But according to our two experts, Alison Fischer, CFP®, Private Client Adviser for Crosbie Wealth Management and Donal Griffin, Director of Legacy Law, you’d be wise to give some very careful thought to how super should be treated in your financial settlement.
“The family home is the asset that’s often the most emotional and hard fought,” says Donal. “It represents stability and security, here and now, while super can seem invisible to people while they’re still far away from retirement. And for that reason, paying out from super to a spouse is often preferred because it won’t have an impact on your immediate financial position. But thanks to the super guarantee and contribution strategies from advisers, we’re now seeing super balances that are close to equal in value to property held in the marriage. So it should be a front and centre issue for discussion in any settlement.”
Alison agrees that people going through divorce are usually more focused on securing their finances in the present. “It’s the future value of your super you need to bear in mind when you’re weighing it up against other assets,” says Alison. “Earnings within super are likely to be more tax-effective than income from other assets or investments, so it has the potential to grow faster. The difference is that you can’t tap into that value any time you like. But by trading off super to stay in your home and preserve your current income level, you could be making a choice that has significant impact on your lifestyle in retirement and your choice of when to retire.”
Can my ex claim some of my super (or vice versa)?
“Super is just like any other property of the marriage,” says Donal “In a financial settlement, it’s pooled with all the other assets a couple share and have contributed to – their home and its contents, savings and investments. And as with these assets, both direct and indirect contributions are taken into account when determining how super is split. Your indirect contribution to your partner’s super might come in the form of raising kids and managing the family home while they’re earning and