How Long After Divorce Can You Claim Superannuation?

Superannuation is not exclusive to legally married couples. De facto couples, who are in a genuine domestic relationship, are also entitled to claim superannuation in the event of a relationship breakdown. This includes couples who have lived together on a genuine domestic basis for a continuous period of at least two years.

What Is Superannuation?

Superannuation in Australia refers to the country’s retirement savings system. It’s a mandatory savings scheme designed to help Australians save for their retirement. It operates on a combination of employer contributions, personal contributions, and government incentives.

Here’s a breakdown of how it works:

• Mandatory Contributions: Australian employers are required to contribute a percentage of their employees’ earnings (currently 10% as of my last knowledge update in September 2021) into a superannuation fund. This is known as the Superannuation Guarantee (SG).
• Voluntary Contributions: Individuals can also make their own contributions to their superannuation fund. This includes both concessional (before-tax) contributions, like salary sacrifice, and non-concessional (after-tax) contributions.
• Government Contributions: The government may provide incentives to encourage individuals to save for their retirement. This includes the co-contribution scheme for low to middle-income earners.
• Investment: Superannuation funds invest the contributions into a range of assets like stocks, bonds, property, and other investments with the aim of growing the fund over time.
• Tax Benefits: Superannuation is tax-favored in Australia. Contributions are generally taxed at a lower rate than normal income tax, and earnings within the superannuation fund are also taxed at a concessional rate. Additionally, there can be tax benefits when individuals start drawing down on their superannuation in retirement.
• Preservation: Superannuation is generally preserved until an individual reaches their preservation age (which varies depending on the year of birth) and meets a condition of release, such as retirement.
• Payout Options: When an individual reaches retirement age, they have several options for accessing their superannuation. They can take it as a lump sum, set up an account-based pension, or choose a combination of both.

Superannuation is a significant part of most Australians’ retirement planning. It’s designed to provide financial security in retirement and reduce reliance on government-funded pensions.

Transferring Super to Spouse

In cases of divorce or relationship breakdown, the division of assets, including superannuation, is a vital aspect of the property settlement process. Superannuation can be transferred between partners through a process known as contribution splitting. This allows a portion of one partner’s superannuation to be transferred into their former spouse’s superannuation fund.

Contribution Splitting and Its Benefits

Contribution splitting is a mechanism that enables couples to ensure a fair and equitable distribution of retirement savings. This process can be done through a consent order or as part of a property settlement. It’s important to note that there are limits, such as the concessional contribution cap, which restricts the amount that can be transferred in this manner.

Claiming a Tax Deduction on Super Contributions

Both members of a former couple may be eligible to claim a tax deduction for super contributions. This can be particularly beneficial for individuals who may not have the same earning capacity or who are re-entering the workforce after a period of absence due to the relationship breakdown.

Preservation Age and Conditions of Release

Accessing superannuation is subject to specific conditions, such as reaching the preservation age and meeting a condition of release. The preservation age varies depending on the year of birth and is a critical factor in determining when one can access their superannuation. Common conditions of release include retirement, reaching age 65, or meeting specific eligibility criteria due to permanent incapacity.