We dedicate a lifetime of hard work to build a financial cushion that we hope will ensure our retirement comfort. In today’s world, most of us hold our superannuation investments close, regarding them as our own precious, private nest-egg. To some extent, this sentiment holds true.

The superannuation reform package unveiled in the 2016-2017 budget aims to enhance the fairness, sustainability, flexibility, and integrity of the superannuation system. It also reinforces a clear objective for superannuation, which is to “offer income in retirement as a substitute for or addition to the Age Pension.” Australians across the board are encouraged to save for their retirement and to increase their self-sufficiency.

Superannuation funds are typically held in trust, which means they are generally safeguarded from the reach of creditors, even in cases involving bankruptcy. However, it’s crucial to recognize that they are not entirely immune to scrutiny. Many of my clients at Reid Legal, who are navigating the complexities of matrimonial property settlements, often hold the misconception that their superannuation is off-limits and cannot be factored into the property settlement equation. Regrettably, this belief is not accurate. When a relationship comes to an end, all assets owned by both parties, including funds invested in superannuation, must be meticulously identified and appraised as part of the shared property pool. This pool is subject to division between the parties, regardless of when the assets were acquired.

In the context of a property settlement, spouses have two primary choices when it comes to incorporating their respective superannuation entitlements. They can either leave their superannuation untouched and adjust for its value from other assets in the settlement, or they can opt for a ‘payment split,’ which involves dividing the superannuation interest. The suitability of each option depends on the specific circumstances of each case. In situations where it is expedient to utilize a payment split for the property settlement, a portion of one spouse’s superannuation will be transferred into a superannuation fund held in the name of the other spouse.

Before determining whether you are obligated to share your superannuation with your spouse in the context of a property settlement, it is essential to ascertain the nature and type of your superannuation interest and its associated value. Once this is established, you can assess the potential impact of the proposed settlement and the probable consequences of a superannuation split. This evaluation will assist you in making an informed decision about whether a payment split is in your best interest.

Regardless of the chosen approach, it’s important to understand that when you engage in property settlement, your entire financial nest egg will inevitably be subject to division.

Our experienced team at Reid Legal can assist you, get in touch today.