When a marriage or de facto relationship breaks down, any property can be divided between the parties. Under the Family Law Act 1975, superannuation is also treated the same way.
Parties must enter a superannuation agreement or obtain a court order to allow the splitting of their superannuation. A spouse may seek a court order when the parties cannot reach an agreement about how to split super.
The trustee is obligated to pay an amount or a percentage of the member’s super to the non-member spouse, so it is essential for the non-member spouse to provide the trustee with advice on payment details. Otherwise, the non-member may be required to pay interest on their half of the super in the fund, or the trustee will transfer the benefits to another fund commissioned by the non-member spouse.
A payment flagging arrangement recognises a member’s fund may be the subject of a super split in the future and puts a flag on their account. Both parties may want to consider this arrangement, as it prevents the trustee from making any payments out of the superannuation interest or transfers to other funds until the flag is lifted.