Listen: Separating with super

Kate Russell
A lot of people in a relationship don’t realise that their superannuation is in the picture if they separate. Around three-quarters of the people who seek legal advice when separating have superannuation in their pool of assets. Welcome to The Separation Guide podcast. I’m Kate Russell, and today I’ll be learning more about what happens to superannuation in separation.
So, what is superannuation? Superannuation, or super, is money that’s invested over your working life for your retirement. It’s a compulsory contribution by your employer, sometimes topped up by you. Or maybe you contribute to your super yourself if you’re a sole trader or business owner. It’s based on a percentage of your earnings. The more you earn, the more super you accrue. Your super balance is an asset that sits in your name and is often your second largest asset after your home. In fact, if you don’t own a property, your superannuation might be your largest asset.
So, what are the rules around superannuation and separation? What do I need to know about my own superannuation and how can I find out about my partner’s super? What’s fair when it comes to splitting super in a separation? What should I consider about my short and long term needs when I’m negotiating a split of assets? And what technicalities of a super split do I need to know about? To help me find my way through the superannuation and separation maze in today’s podcast, I’ll be guided by the experts.
I’m delighted to be joined by our network member, Samantha Miller. Samantha is a principal lawyer at Clarity Lawyers in Newcastle, and she’s been practising law since 2001. Samantha specialises in family law. She takes people from what is sometimes one of the most vulnerable and stressful moments in their lives through to being able to plan and see a happy future ahead of them. Thank you for joining me today, Samantha.

Samantha Miller
Thank you, Kate.

Kate Russell
Another of our network members joining me today is Chris Fagan. Chris is a financial advisor based in Melbourne. He’s director of Scholten Collins McKissock Wealth Management and has more than 15 years experience supporting clients with their collective wealth management needs. Chris has experience across all aspects of financial planning, including those with complex financial situations, and wants to empower each of his clients to become the CFO of their own finances. Thank you, Chris and welcome.

Chris Fagan
Thank you, Kate.

Kate Russell
My last guest is Christina Hobbs. Christina is the co-founder and CEO of Verve Super. After working for ten years with the United Nations, Christina founded Verve, Australia’s first superannuation fund tailored for women. Her mission is to help women build their financial power, improve their financial literacy, and have ethical investment opportunities. Christina also wants to ensure that capital is used to help build a better world. Lovely to meet you, Christina. Thank you so much for being here.

Christina Hobbs
Thanks for having me.

Kate Russell
So, the first thing I’d like to talk about today is just the legislation in general around superannuation, who makes the rules around superannuation and divorce in Australia? And do those rules change?

Samantha Miller
With respect to how divorce impacts superannuation, that’s Commonwealth legislation. So that’s the same Australia over.

Kate Russell
And are there any laws that change in different states?

Samatha Miller
There is one slight difference in Western Australia in that superannuation splitting orders are not available for de facto couples.

Kate Russell
So, for de facto couples elsewhere in Australia, do the rules apply the same?

Samantha Miller
They do it’s as if they’re married. It makes no difference.

Kate Russell
Are the rules the same if I have a self-managed super fund or industry or retailer super fund?

Samantha Miller
Yes, exactly the same.

Kate Russell
If my partner and I are separating and we’re amicable and we’d like to follow a DIY pathway, can we use this pathway and still split our superannuation?

Samantha Miller
If you mean by DIY, do it all completely by yourself, it is quite tricky to actually draft superannuation splitting orders. So, while you might reach an agreement directly with your ex-partner, it’s probably best if you’re going to do a superannuation split to have the orders actually drafted by a lawyer because they need to be approved by the trustee of the super fund. And they can be very tricky to draft.

Kate Russell
Let’s talk about some planning around super. For many, super is a set and forget asset. Some people aren’t even aware of how much super they have, or they might have multiple super accounts or lost super. What are some good practices around super accounts that we might need to think about in the early stages of separation? Christina?

Christina Hobbs
Yeah. So, I think something that’s really important is obviously to consider that superannuation in terms of a separation will go into the overall pool of assets like any other asset, to then be divided by the two people within the separation. So, I think what’s really important, first of all, as you’re beginning to gather information on what assets you have as a couple, is to ensure that you have an understanding of your superannuation and also your partner’s. So, from your side, that information can be found relatively easily. A lot of us may not even know what superannuation assets we have, and it’s very easy to lose track of those assets. So going in to MyGov, login to your MyGov account is one way that you can actually find all of the superannuation accounts that you have. So first of all, knowing what assets in your name is really important, and then also understanding what assets are in your partner’s name as well. And then obviously sort of getting probably a preliminary understanding. You could call your superannuation fund just to get a bit of an understanding about the process that you’ll need to go through in the event that you do decide to divide superannuation assets during the separation.

Kate Russell
Is there a way I can find out how much super my spouse has?

Samantha Miller
Each party in a family law matter has an obligation to give full financial disclosure to the other. So certainly, you could ask the other side to provide you with that MyGov printout, or you are actually able to approach the superannuation fund yourself if you know which one it is, and you’re entitled to gain that information directly from the fund.

Kate Russell
I’d like to talk a bit now about fairness and maybe looking at a few of the myths around fairness. Superannuation splitting can be a contentious topic for some separating couples who have completed our Q&A, and there’s sometimes some debate around what’s fair, and some strong feelings around the idea of a 50 50 split. Now obviously I understand every situation is assessed on a couple’s particular circumstances, but can I run through a few common questions? I might have less super than my partner for a variety of reasons. One possibility is that I’ve been a primary caregiver, and I’ve forgone years of earning and super contributions. How is that treated when it comes to splitting superannuation?

Samantha Miller
When you’re talking about a property settlement following parties separating, we look at contributions to all of the assets. And it’s not just direct financial contributions to those assets. It’s also indirect contributions. So, for example, by one person staying at home to look after the kids, it’s actually allowing that other person to go out and make that money, which is contributed towards the superannuation. So essentially, your contributions will be considered equal and your entitlements to that superannuation considered equal.

Christina Hobbs
We sort of hear it from people from both sides. So, when I’ve had conversations with women around this and their super, on one hand, there’s sometimes this feeling of, oh, you know, like, it’s his superannuation, it’s her superannuation, and it was attached to her income. And it’s not really my money. And this sense of like, oh, perhaps it shouldn’t be added into the pool, but often the way we try to get people to think about it is that not only, as Samantha said, is the issue that you did contribute other things at the time that that money was earned, and that overall that should be split. But what we do tend to see, and particularly this impacts women, is that, of course, like other forms of income, is that often the partner that has stayed at home to be the carer: they have sacrificed their career. And they’ve not only sacrificed that in the past, but how that is going to build into the future as well. And so superannuation is a retirement benefit – is for when we retire. And sadly, that even when assets are split equally, what we know particularly around superannuation, is that if one partner has been out of the workforce and the other partner has been in the workforce, that partner that’s been in the workforce is going to be able to rebuild their superannuation balance likely much, much faster, because they’re going to be going on and earning that superannuation into the future. And so it is really important that if one partner has been home caring, that they do feel like they are entitled to a share of that asset like other assets, and also for that partner to realise that. That they’re going to have to be the ones building their superannuation balance in the future.

Kate Russell
So, my potential earning of super is also considered in the split? Are there considerations around super and the parent who might be caring for children post-separation who’s looking after the kids a greater proportion of the time?

Samantha Miller
What you’re referring to there is not just specific to superannuation. I think it’s specific to the whole matrimonial pool of assets. In a property settlement, we look at all of the assets and liabilities and basically lump them together in what we call the matrimonial pool of assets. And we quite often keep the superannuation separate from that pool. But when we are looking at how we divide that asset between the two parties, we do look at things firstly contributions, which I’ve already mentioned, but also each party’s future needs. And that’s where that disparity in income comes into play, as well as a greater share of the care of the children. Because not only is having the children with you more often a bit more costly, but it also impacts your ability to earn and, as Christina said, your ability to get back on your feet more quickly and reestablish your superannuation and your financial position post-separation. So, you’re likely to find that the parent that has potentially a lower income and a greater share of the children received a greater share of the asset pool relatable to those issues.

Kate Russell
If I’m a sole trader or business owner, and perhaps I haven’t always contributed to my superannuation and my partner maybe have employer contributions, how could this situation affect a super split?

Samantha Miller
Again, I think what we do is we have that pool of assets, and just because one person didn’t necessarily contribute to their superannuation doesn’t mean that they’re not equally entitled to that pool of assets. So, if you’ve not been contributing to the super, that money’s presumably still existed and it’s been used within the marriage in some way for the benefit of the family, and it would be counted just like any other asset, and you’d have an equal… the same amount of entitlement to the asset as you would have if you’ve been contributing to throughout.

Kate Russell
What about if I’ve contributed maybe ten or 20 years of super to my funds before I’ve entered the relationship? What does fair mean around that situation?

Samantha Miller
That’s back to the issue of contributions. So, we got our asset pool and we look at the contributions to those asset rules and contributions. There’s loads of different categories of them, but one important one is the initial contributions. So, what each party brought into the relationship, and that will give potentially one person a greater pull on the assets of the relationship. Generally, if you’ve got a marriage that’s 20 or 30 years long, those initial contributions won’t be given a huge amount of consideration. However, if the relationship is, say, five years or shorter, those initial contributions are going to be given a lot of weight. And if the relationship breaks down very early on, then you could nearly think of it as trying to put those people back into the same position.

Kate Russell
What about post separation? If my date of separation is several years before I finalise a divorce, what happens if I’ve built my super after the date of Separation? Is that included in the asset pool?

Samantha Miller
Yes, it is. Everything at the time that the court is asked to deal with the separation, everything from that date is included. A lot of people would like to argue that it should be from the date of separation, but legally, you must disclose everything as at the date that the court is looking at it. You then can try and make arguments about potentially why it shouldn’t be dealt with by the court. For example, it arose post-separation, but generally with superannuation, if one of you has acquired more superannuation than the other, then it’s probably because there’s a disparity in your income or because there’s a greater share of care of the child or children to the other party. So, I don’t think you’d get a lot of credit for contributions to super post-separation, but certainly arguments can be made.

Kate Russell
I have one more question around splitting super. We’ve just had a situation with the pandemic where individuals were able to draw down on their super and release some of those funds. If my spouse released super when we were together and we’ve now separated, how would that affect our entitlement after we split?

Samantha Miller
Well, if it was released during the relationship, it would be assumed that it was utilised for the good of the family unit and it just disappeared. Essentially, it may have been used to pay off the mortgage or it may have just been spent, but in either case, not much is going to be made of that unless it was spent, say, post-separation for entirely personal needs, in which case it might be notionally added back into the asset pool and notionally divided.

Kate Russell
Chris, I’d like to bring you in now to talk about some of the things that we might have to think about in planning our finances. When I am separating from my partner, what do I need to consider about my short, medium and long term financial needs?

Chris Fagan
When I look at splitting the asset pool, there’s plenty for consideration through all different sorts of topics is coming around asset pool splitting. I think Samantha and Christine have touched on a number of those around the pooling of assets and the division of that asset pool. From my point of view when I’m speaking to clients initially, do you have an understanding around what assets are in place and what liabilities are current and what’s going to happen post-separation with — whether it be the family home and the debt that’s sitting there or discussing, say, around superannuation? And a lot of it is around education because a lot of people, you’re right, it’s 10% of someone’s income going into a superannuation fund, which builds up over time. So, it’s really important that clients are aware of what’s in place, and then we can make some informed decisions around some planning. And I call it sort of plan A and plan B. And you can think about sort of short term and medium term around the process that needs to be followed to get to a result that everyone is comfortable with.

Kate Russell
What might I need to think about when choosing to take a portion of the superannuation over cash or vice versa?

Chris Fagan
Yeah. Important considerations there because a number of people think if they split with their spouse with superannuation, that they can actually get their hands on the money. So could that be used to pay down a mortgage or to help buy a new house? It’s important to know that unless you’ve met a condition of release, that money has to stay within the superannuation environment until said time. So typically, that might be age 60 and retired, those types of different rules that exist.

Kate Russell
What would you recommend people consider if, say, they have 20 or 30 working years ahead of them versus an imminent retirement?

Chris Fagan
Everyone’s different, so it really depends on client circumstances. We are in an environment now where housing affordability is more difficult than it’s ever been. However, the cost to finance and borrow money has never been as low, so at some point in time, that needs to be considered around cash flow and budgeting and also taking into account longer-term goals, which then superannuation sits in that bracket, particularly if you’re 20 to 30 years away from retirement. If retirement is more imminent, definitely be looking around how that asset’s structured and what are the different options for both parties for the Superannuation Fund moving forward.

Kate Russell
Let’s talk a little bit about when the split has actually happened. When does the split actually occur? So does that occur at settlement, or is it when I retire?

Samantha Miller
It occurs when the orders say it occurs. So generally, you reach an agreement and you have that drafted up into orders and file the report. Those orders will generally say something like three days after the date of these orders or something like that. It’s not in the future. It is contemporaneous with the separation and the agreement. So once you have those orders, from my perspective, what we do with them is we send them to the superannuation fund, and then they’re implemented by the Superannuation fund.

Kate Russell
What happens to the money? Does it transfer to my nominated fund, or will that fund create a new account for me?

Samantha Miller
They do whatever you ask, really. So, if you want to send it to the account that you already have, that will happen. Or if you want to create a new account in the existing superannuation fund, that can happen. They will do what you direct them to, provided, obviously, that it’s going to a proper superannuation fund.

Kate Russell
So, what do I need to consider about my existing fund after my separation when it comes to things like insurances and allocated death beneficiaries of my account?

Christina Hobbs
I can answer that one. Yeah. So, for a lot of us, we have certain types of insurances paid through our superannuation. Typically, it is death insurance, or I like to call it life insurance, which is that insurance is paid out if you pass away. There’s also often income protection insurance. So that’s the type of insurance that pays out if for some reason you’re not able to work. And then also often people have some form of permanent disability insurance, so that’s if something happens to you and you’re not able to work in the future forever. So, there’s a couple of things that people need to really take into consideration. So, for instance, when we’re setting up these types of insurances, we’re often thinking about our family structures. So potentially, if you were married to somebody who was the primary breadwinner in the relationship, the insurances that they had structured under their superannuation would have essentially been covering you should something that happened to them and their income. Once, of course, you have gone through a separation, you will need to make certain that you’re protected and that any children or any dependents you have are protected through your policies. So, you might want to still think about your other partner and how particularly your dependents could be supported should something happen to you. But essentially, you’ll need to, I guess, think about yourself as an entity and then look at what you might be wanting to set up through your own superannuation to ensure that you are covered.
So, for instance, if you in your old life in a couple, if you knew that, let’s say you’re injured, and that you weren’t able to work, that you had your partner there to provide income support to you, potentially having some form of income insurance wasn’t as important as it might be now. So, you might want to re-look at what insurances you have. On the other hand, it’s really important that when we do go through life events, such as a divorce or separation, that we get in touch to update our insurance details. And depending on the fund and the type of policies that we have, these kind of life changes can actually impact policies that we have. And so it’s very important whether you go through divorce or separation, if you’ve got a different family structure, if you have a different employment structure that you do get in touch with your insurer to ensure that you provide the new notifications to make sure that you are adequately insured.

Kate Russell
And do you think, Christina, I should think about perhaps opening a new fund? Could the fund I’m currently with not be suitable anymore?

Christina Hobbs
From an insurance perspective, I think it’s really important because superannuation funds will have their own insurance funds that they’re tied to. What a lot of people don’t know is that you can arrange insurance with a different insurance provider and still have it paid out of your superannuation fund. And what I really suggest to people is to actually see advice from a proper adviser in relation to their insurance and make certain that they have the best insurance to meet their needs. I think it’s something really invaluable that any of us can do. There’s far too many Australians that are paying too much insurance for their needs. There’s far too many Australians that are paying for insurance right now that won’t cover them if they do go through some incidents, because despite the fact they’re paying the premium for whatever reason, they wouldn’t be covered based on the wording of those policies. So, I actually think it’s a really important thing for anyone to do, and particularly if you’re going through divorce and separation. And if you are somebody that potentially the other partner has sort of had this in their realm of things that they manage in the relationship and this is coming into your realm, I highly recommend speaking to a professional about it, particularly if your circumstances are a little more complex. If you have dependents who are going to be dependent on you financially, then I think it’s really critical to make sure that we do have policies in place that match our lifestyles. And particularly, as you mentioned, if you’re in that realm of being in business yourself, you’re in the realm of being somebody who has part-time employment or flexible employment or as a contractor, those forms of employment often cannot fit under certain insurance policies. So, I know of incidences where people have been employed in full-time work, they’ve taken out an insurance policy, their employment circumstances have been changed. And often we know that people have gone through divorce and separation. That is a time when employment circumstances change. They’re still paying the premiums on their old insurance, but they’re actually not covered anymore. So, I think it is really important going through any of these times in our life where we do see changes across numerous aspects and numerous circumstances in our lives, that we do go back and check-in with our insurance policies.

Kate Russell
When you say speak to a professional, what kind of professional should they speak to to get that advice?

Christina Hobbs
You can speak to your superannuation fund to get a bit more of an understanding of the insurances that are provided through that fund. But generally, our hands are quite tied in terms of being able to provide you with advice about how that superannuation policy may meet your needs. We will then defer people onto the insurance fund to speak to them in more detail. But again, based on the regulatory settings around providing what’s called personal advice versus general advice, is it’s often challenging to actually provide that advice or that guidance in a way that really meets people’s needs in a generalised way. And so what I suggest is actually getting some form of personal advice. And so going and speaking to — if you already have an accountant who you’re on good terms with or a financial adviser, that advisor can really look at your personal circumstances and then make certain of the insurance so they’re providing for you or that they’re recommending for you is linked to your personal circumstances. And then, as I said, that insurance, and often those fees can actually be paid through your superannuation.

Kate Russell
And so for people going through this kind of situation, it can be really worthwhile to pay for that professional advice in order to come out with the best outcome for them and for their future?

Christina Hobbs
Certainly. And I think that probably goes for finances in general. So if you are receiving a significant sum of money in general after a divorce or separation, if you haven’t been used to managing the assets in the relationship, having that professional guidance is an incredible thing that you can do for yourself to make certain that you’re maximising how those assets are being managed. And then also on the insurance side, making certain that that’s in place. And obviously, finding somebody that you trust is really important. It can be really invaluable paying an upfront fee to an adviser where you might have to separate with some money. But knowing that the value of that, I think, is what’s really important, looking at the lifetime value of that investment and also having the confidence to manage money yourself, if you’ve been used to your partner in a relationship, doing that is really important.

Kate Russell
That’s great advice, Christina. And of course, people who go through our Q&A at The Separation Guide can be put in touch with financial advisers who have signed our ethical charter, like Chris, who really do have the best interests of the separating couples first and foremost. So, I have one more question. Separation can be a time for people to take stock and really reassess many aspects of their life. How can I use this opportunity to ensure that my investments align with my values?

Christina Hobbs
I think it’s a really exciting sort of way of looking at money. And obviously we’re a separation fund tailored for women. So I’m thinking more with our members in mind. But the conversations that we often have with women after divorce and separation is often that their partners have been managing the money in the relationship. And not from everyone — I don’t want to classify everone into one pot. But often what women tell us about is ‘I’m too busy.’ The things that they really care about is more around their children or it’s around their work. A lot of our members might even work in professions that it’s not for profit, it’s nursing, it’s caring. We know that women are more likely to be in those roles. They’ve got very strong values in relation to their social contribution as well. And for many women, talking about money or trying to engage women with their money, if we’re just sort of framing it in terms of building money for money’s sake can often not be very motivating.
And I think that engaging people around the ethics of the things that they’re investing in is a great entryway for people to actually realise the power of their money. So I think there’s two things that we try to really focus on, and I think they’re good focuses for anyone who is now taking on a money management role for the first time and is not motivated by that concept. And I think the first is really realising that the power of good financial management is really to have freedom to build wealth across the rest of our lives. When we talk about wealth building, we really go back to the dictionary definition, which is having abundance of what you value in your life and having good money management. Taking the time, speaking to a professional, to structure things well is really just about ensuring that you’re set up to have an abundance of all the things you do care about. So not having to worry, work as much, potentially one day, being able to retire early to spend more time with your grandchildren or your family, not having financial stress in your life. And so I think sort of looking at the power of money, of how it can help support your life is one really important entryway that we use to speak to our members.
And the second is, as you said, the really the ethics around what we’re investing in. So where, for instance, we don’t invest in companies who are involved in weapons or tobacco or gambling or fossil fuels. And I think this is another great entry for young people who really care about their money. And not only do we not invest in those things, we also impact invest in initiatives that support women. So, we invest in women’s businesses, we invest in female founders. We also invest in social housing for women. And so there’s really incredible ways that you can use your money to not only build your financial wealth, but also be able to contribute to a better world through your finances. And not only do I find that really exciting, but I think it’s a really exciting way of talking to women or talking to anyone about money, men and women who potentially aren’t so motivated by just building financial for financial wealth’s sake.

Kate Russell
I hope we’re finished in a way that lets people approach their superannuation and financial future with a positive outlook. I’d like to thank Christina, Samantha and Chris for all their contribution to today’s podcast. Even if your separation is amicable, splitting your superannuation and your family assets as part of a settlement is never a smooth process. The legislation is designed to provide an equitable split of assets based on your contributions to the relationship, and our expert network members are qualified to help you get to a fair outcome and that both of you can get on with life with a fresh start and hopefully some financial security around your retirement.
If you found the information in today’s podcast useful and you’d like to learn more about your options in separation, or you want to be put in touch with professionals who believe in de-escalation and court as a last resort, please go to theseparationguide.com.au and complete our Q&A. If you know anyone who is affected by the issues we talked about today, please share the podcast.

In the spirit of reconciliation, The Separation Guide acknowledges the traditional custodians of country throughout Australia and their connections to land, sea and community. We pay our respect to their elders past and present and extend that respect to all Aboriginal and Torres Strait Islander peoples today.