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This information is about relationship breakdowns between spouses.
A spouse includes another person, although not legally married to the person, who lived with the person on a genuine domestic basis in a relationship as a couple (whether of the same or different sex).
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Marriage and relationship breakdowns can occur for many reasons, such as irreconcilable differences or domestic violence. If your relationship breaks down, you should be aware of what can happen to your super entitlements.
This depends on whether you are a:
Members of APRA regulated funds
The Family Law Act 1975 and the Superannuation Industry (Supervision) Act 1993 (SISA) provide for an interest in superannuation (super interest) or a super payment to be divided or split by agreement or court order in the event of a relationship breakdown.
A member's super interest is defined as their 'interest in a superannuation fund' - generally, an account will constitute an interest in the fund.
Super agreements and court orders specify how a member's super interest in the fund, or how a super payment is to be split between the member and non-member spouse.
Splitting super interests and payments
Depending on the rules of the fund, it may be possible for a member's super interest to be split immediately upon receipt of the agreement or order, rather than waiting for a member's benefit to become payable (such as when they meet a condition of release). This means that the obligations under the agreement or court order can be finalised closer to the time of separation, rather than waiting until retirement of the member spouse.
If available, a new super interest can be created for the non-member spouse in the member's fund, or transferred or rolled over to another fund. In some cases, the non-member spouse may be immediately entitled to be paid their interest in the form of a super benefit if they meet a condition of release.
The tax-free and taxable components of the super interest or a super payment must be calculated immediately before the interest split or payment, and divided between the split interests or payments in the same proportion.
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For more information, refer to:
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Super benefit payments from an interest subject to a payment split
Where a new interest in super is created for the non-member spouse, any super benefits subsequently taken by the non-member spouse from the new super interest are taxed according to the current rules for member benefits.
When relationship breakdown occurs after a super income stream has started to be paid, a super agreement or court order made under the family splitting laws can specify that the super income stream be split.
In most cases, the super income stream would be commuted and the non-member spouse paid their entitlement under the agreement or court order. The remainder would be paid to the member spouse either as a lump sum or a reduced super income stream.
Where the non-member spouse's entitlement is paid as a super lump sum, it is treated as a separate super lump sum benefit for the non-member spouse.
If the non-member spouse's entitlement is paid as a super income stream, it is treated as a separate income stream for the non-member spouse.
Where the super income stream is unable to be commuted due to the governing rules of the fund, the split is effected by dividing each income stream payment between the member spouse and non-member spouse.
The split will result in two regular payments being made from the same income stream, one each to the member spouse and non-member spouse.
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More information on super and relationship breakdown is provided by the Department of the Attorney-General at www.ag.gov.au.
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Relationship breakdowns and the acquisition of 'in specie' super assets
If you are a trustee or investment manager of a regulated super fund, you are not prohibited from acquiring an asset from a related party of the fund where the acquisition occurs as the result of a relationship breakdown of a member of the fund.
The asset may be acquired from a trustee or investment manager of another regulated super fund under these circumstances.
Tax consequences of splitting super
The tax consequences from splitting super on relationship breakdown could include:
- a super lump sum payment and pension paid to the member spouse and non-member spouse being taxed separately
- super lump sum components being calculated for member spouse and non-member spouse entitlements individually.
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For more information, visit the Attorney-General's Department website www.ag.gov.au.
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Members of self-managed super funds
If you are a self-managed super fund (SMSF) trustee or member and your relationship breaks down, you must continue to act in accordance with the super laws and the trust deed of your fund.
An SMSF works like any other super fund but the responsibility of managing it rests solely with the trustees. As trustee you have control over and responsibility for your fund's investment decisions. You also have to manage the fund's legal responsibilities. Despite any difficulties you may have with an individual on a personal level, as a trustee you must continue to act in the best interests of all members at all times.
You cannot:
- exclude another trustee from the decision-making process
- ignore requests to redeem assets and roll money over to another regulated complying super fund
- take any action that is not allowed by Superannuation Industry (Supervision) Act 1993 (SISA) or the SMSF's trust deed.
If you do any of these actions, your SMSF can be made non-complying and will be subject to significant tax consequences. You could also be disqualified as a trustee, effectively stopping you from running an SMSF in the future.
It is important to consider these issues in a marriage or de facto relationship breakdown. However, they apply to all relationship breakdowns - for example, between a father and son, an uncle and niece, or friends. Legal proceedings between trustees or members of your SMSF do not suspend your trustee obligations.
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If you are unsure of your responsibilities as a trustee, contact us on 13 10 20 or seek the help of an independent professional.
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Relationship breakdowns and the acquisition of 'in specie' super assets
The Commissioner has previously made a determination that allows a trustee to acquire assets from a related party of the fund as a result of marriage breakdown. Amended legislation has broadened the scope to allow the acquisition of assets from a related party arising from the breakdown of opposite-sex and same-sex de facto relationships.
In addition, changes have been made to allow for the application of the transitional exemption provisions in relation to in-house assets where assets are acquired as the result of a relationship breakdown.
These changes apply to assets acquired on or after 17 November 2010.
Last Modified: Wednesday, 4 July 2012