Did you know that your ex may be able to claim half your superannuation, even if you aren’t married?
Although moving in with your significant other can be exciting, under certain circumstances, this could spell disaster for your superannuation.
Moving in together is an exciting time for people in relationships. Likely the last thing on your mind is what might happen in the event of a break-up.
But it’s worth knowing that if you split, your ex could be able to file a legal claim for up to half your superannuation, under certain circumstances.
And for all states (except Western Australia), you don’t need to be married, have kids or own a house together; even people in de facto relationships may have to split their super when they break up.
For the purposes of family law, a de facto relationship is when you and your partner live together in a relationship as a couple on a genuine domestic basis but are not married.
The superannuation of both partners is included in the pool of assets divided on separation. Super is often the single biggest financial asset younger people have, so make sure you know what the law says on this question.
When you move out with a significant other, the break-up is the last thing you’ll be thinking of. But under the right circumstances, this could spell disaster for your superannuation.
By order of the court, or by agreement
Splitting up super could become a bigger issue in years to come, as compulsory employer contributions ratchet up.
When superannuation was made compulsory almost 30 years ago, employer contributions were three per cent. As of July 2021, they’ve hit 10 per cent. So these assets are getting bigger, faster.
According to the federal Attorney-General’s website, superannuation can be split either by:
- an order of the Federal Circuit and Family Court of Australia (or Family Court of Western Australia for married couples in Western Australia); or
- a superannuation agreement (a financial agreement that deals with a superannuation interest).
The Family Law Act 1975 gives the Family Court the power to deal with superannuation interests of spouses (including de facto spouses).
The superannuation cannot usually be taken as a cash payment; in most cases, it is rolled over to the recipient’s own superannuation account.
You don’t need to be married, have kids or own a house together to be seen as a legitimate couple in the eyes of the law.
These laws were designed to tackle the longstanding issue where one person in a relationship – usually a woman – would have a tiny amount of super relative to her partner.
That’s because, back a generation or two, it was common for women in particular to give up work and spend many of their productive years as primary carers for their children. Even now, women are more likely than men to reduce their working hours to raise a family and have a fraction of the superannuation of their male partners.
The laws are meant to ensure equity in the event of the relationship foundering, and improve the life of the person with less financial power in the relationship after it ends.
But society has changed and we are more likely to separate and re-partner. That, plus the higher amounts involved, means these cases may be cropping up more often now than in the past.
WARNING: You don’t have to be married to potentially have to split your assets.
It applies if you have a child together or have been in a de facto relationship for at least two years.
The definition of a de facto relationship under section 4AA of the Family Law Act 1975 is based on whether you were living together in a genuine domestic relationship.
According to the Act, a person is in a de facto relationship with another person if:
- the persons are not legally married to each other; and
- the persons are not related by family;
- having regard to all the circumstances of their relationship, they have a relationship as a couple living together on a genuine domestic basis.
The circumstances of the relationship are set out and include matters such as how you organise your financial arrangements, whether you have children, your commitment to a life together and whether other people would see you as a couple.
So consider these issues before you move in together or take steps to cement your relationship.
Remember that a split isn’t necessarily half-half. You can enter into an agreement without going to court, but if you do end up in court the judge will take into account the relevant circumstances including whether you have kids, direct and indirect financial contributions to the relationship, and the ongoing needs of each party.
And if a relationship has ended in bitterness, judges will hopefully be alert to the possibility a legal claim for an ex-partner’s super could be part of a vindictive effort to cause distress, and take that into account.
If the superannuation claim has come from a malicious ex-partner, the court should take this into consideration.
It’s not common for people in new or de facto relationships to draw up legal documents to protect themselves.
Go in with your eyes open, but you do have to have a certain amount of trust. Engaged couples do sometimes look at drawing up a financial agreement (a prenuptial agreement), which can address issues like super.
Remember, a financial agreement – either before or after the relationship has broken down – is not binding if both parties have not obtained financial advice.
Couples who have already been through the difficulties of divorce, separation, or being widowed may be more likely to make legal arrangements to choose what will happen in the event of separation or death, particularly if they want to make sure children from that relationship are financially secure.
And absolutely everyone – young and old – should look seriously into where your super will go in the event that you die. It’s important to ensure your super goes where you want it to.
Maybe it’s time to put your affairs in order, and create a modern integrated estate plan before it’s too late?
Be cautious, and take advice before you decide.
When it comes to Wills, asset protection & estate planning in Australia, you can trust the oldest law firm in South Australia, Genders & Partners to guide you through the tough decisions you must make for your family’s future care and welfare.
If you have any questions, or would like further information, please call or email us. Would you like a quick phone call to discuss? Feel free to phone or email us or use this link and book a timeslot for a free 15-minute phone consultation on my schedule: https://calendly.com/genders
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We can help you to protect yourself and your family. We look forward to being of service.
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