Superannuation is an area that many of us find confusing and don’t fully understand. We know we have it and it is good to have, but the specifics of when we can access it and what we can do with it are on our “to do” list – “understand my super”. This approach to your super works fine, unless and until your relationship breaks down – as superannuation (“super”) is an asset that needs to be considered in a property settlement.
The following 5 points will help you understand how your superannuation works after separation:
1. Super can be split
Each of your super balances are assets that need to be taken into account when detailing the assets and liabilities of your relationship. Super, like other assets you own, can be split between you and your partner in your property settlement, if you wish.
2. Super needs to stay in super
While super can be transferred between you and your partner, as part of your property settlement, it still needs to remain invested in super. Splitting and transferring super from one partner to another, means the super balance of the transferring partner is reduced and the super balance of the receiving partner is increased – it does not mean that the transferring partner can pay the super to the receiving partner as cash. Splitting super does not change the asset from super into cash.
3. When can super be accessed
You can access your super when you satisfy one of the following, called conditions of release:
- reach your preservation age and retire (your preservation age – being 55 to 60 – based on your date of birth);
- reach your preservation age and choose to start a transition to retirement income stream while you are still working;
- you turn 65 (even if you have not retired).
4. Early access to super
You can access your super early in some special circumstances. The circumstance will determine how much of your super you can access early.
The more common special circumstances to access your super early are:
- compassionate grounds;
- severe financial hardship.
5. How are super withdrawals taxed
The tax that you will pay on any super payment is based on:
- your age when you receive the payment;
- whether the money in your super account is tax-free or taxable;
- whether you get the payment as a lump sum or income stream.
Make sure you contact your super fund before requesting a payment, so you understand the tax implications – as with planning, you can achieve your goal of receiving your superannuation payment tax free.