Divorce, Superannuation and the Gender Divide

New legislation will help prevent superannuation assets from being hidden during divorce proceedings.

From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual's superannuation information to a family law court.

The recently enacted laws are designed to ensure that there is procedural and economic fairness in divorce proceedings to prevent the under-reporting of superannuation assets. While a spouse's superannuation information can be obtained now through legal action, if it is not provided willingly, it is often expensive and time consuming to obtain factual information through subpoenas or court orders.

From April 2022, when a couple have entered into divorce proceedings, if one of the parties believes the other is not being forthcoming about the value of assets held in superannuation, they can apply to a family law court registry to request their former partner's superannuation information held by the ATO.

What happens to superannuation in a divorce?

In a divorce, superannuation is treated like any other asset and included in the division of assets in a property settlement or financial agreement. For superannuation to be split, there must be an order from the Family Court or Federal Magistrate Court, or a superannuation agreement.

If a superannuation account is split, it does not convert into cash unless the receiving spouse is aged 65 or over, or has reached preservation age and has retired. In most cases, the superannuation is immediately rolled over into the receiving spouse's superannuation account.

The superannuation divide

On average, women earn 14.2% less than men based on full time earnings. When part-time work is taken into account, this figure blows out to 31.3%. It is currently estimated that when a woman retires, she retires with around 42% less superannuation than a man.

Superannuation equalisation

Where couples have significantly different superannuation account values but are of a similar age, there are practical reasons why they might look at evening out any gap. Where one spouse is close to or likely to reach their transfer balance cap, redirecting superannuation contributions to the spouse with the lower balance means that together, they maximise their tax-free income in retirement.

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