How is Superannuation treated in Family Law?

Superannuation is categorised as property in family law, meaning it can form part of the asset pool between separating parties which can be divided, which is called “superannuation splitting.” However, it cannot be converted into cash unless the person receiving the superannuation split is eligible to withdraw the funds (usually because they have reached retirement age or are eligible for early withdrawal due to some sort of hardship). It is quite common for people to have all or part of their superannuation in a self-managed superannuation fund (“SMSF”). This is often done to diversify investments, including shares, bonds, real property. There are various tax implications and reporting requirements. Some couples choose to set up an SMSF together and roll all or part of their superannuation entitlements into the SMSF. Sometimes one or both parties held superannuation in an SMSF before the relationship and they choose not to intermingle their superannuation.

Superannuation Splitting

Superannuation splitting can be achieved in two ways: firstly, through Orders of the Court (whether by agreement or by a Judge or Registrar after a Hearing) or through a Binding Financial Agreement. It is not sufficient to sign resolutions or a memorandum of understanding, heads of agreement or other informal document.

This article will refer to both as “splitting orders.” As with other types of property, the relevant date for determining the value is the date of the hearing or the date the consent orders are executed, not the date of separation. For “accumulation” funds, where the money held in fund grows over time through contributions by you or your employer and the investment return, the process is relatively simple: a superannuation statement and document showing the current balance is sufficient for the purposes of determining the value. If the accumulation interest is in the “pension payment phase” it may be qualified as a financial resource and may need to be valued by an expert. “Defined benefit” interests are more complicated than accumulation interests, these will generally need to be valued by an expert, even where there is no splitting order. However, for both of these types of interests, the payment to the other party, called the “non-member spouse” can usually be split in accordance with Section 90XT of the Family Law Act. Self-Managed Superannuation Funds too will generally need to be valued by an Expert valuer, and may even require multiple valuations if the Fund owns real property, but the way that the Orders or Agreement deals with a “split” is different and complex, particularly if the SMSF owns real property or other investments such as shares.

There are two types of splitting orders:

  1. Base amounts. This is a dollar figure which is specified in the Orders. It cannot exceed the value of the entitlement.
  2. Percentage split. This is a percentage amount of the member’s interest. Sometimes people express it to be a percentage of the total asset pool and annex a balance sheet to the Orders, however, this is best avoided.

For both types of splits, whenever the splitable payment becomes payable, the non-member spouse is entitled to be paid the amount calculated in accordance with the Family Law (Superannuation) Regulations 2001 and there is a corresponding reduction in the entitlement of the person to whom the splitable payment would have been made but for the order.


A self-managed superannuation fund is a private fund that is established, managed and overseen by the member(s) who is/are also Trustee(s). The Trustee may engage an accountant to assist with the management of the fund. Some people choose to use an SMSF so the member has control of the investments in their superannuation portfolio, for example, they may wish to buy a real property, commercial property, shares, cash and bonds . Most people tend to have a diverse portfolio with different classes of shares but some also have real property. The aim for most people choosing an SMSF is diversification of risk.

A SMSF is a special type of trust arrangement. The Trustee is a person or company which holds assets (trust property) for the benefit of members (the beneficiaries). The SMSF must meet the “sole purpose” test, meaning it is set up for the sole purpose of providing retirement benefits to the beneficiaries . This is set out in the Superannuation Industry (Supervision) Act 1993 (Cth) (“SIS Act”). Members are not allowed to access benefits from superannuation prior to reaching the prescribed age (called preservation age) and one of the conditions of release which are contained in the Superannuation Industry (Supervision) Regulations 1994 (Cth).

SMSFs are becoming increasingly popular, especially as people are seeking greater control over how their superannuation is invested.  Some people who consider themselves knowledgeable in the property industry choose this option with a hope to realise higher percentage gains than the traditional share market increases. In Australia, the average return on investment for Australian shares is 9.8% . However, investments must only be made if the Trustee genuinely believes it is an appropriate way to achieve its core purpose. The Swiss Chalet Case (Case 43.95 [1995] ATC 374) should serve as a warning to members who intend to purchase property but also enjoy other benefits of that property. In that case, the Trustee had invested in a unit trust which owned a chalet in Switzerland which the members and their friends stayed in. The Trustee was found to be in breach of the sole purpose test.  Members, family members or friends are not permitted to stay or live in real property owned by the Trustee or transact with assets owned by an SMSF.

There are taxation benefits associated with having an SMSF, provided certain conditions are met pursuant to SIS Act.

The Australian Taxation Office is the regulator of SMSFs and works together with the Australian Securities Investment Commission (ASIC). However, there are costs associated with setting up and running an SMSF including accounting fees, which is why people with larger superannuation balances tend to opt for this option.

The Trustee

Trustees of SMSFs are responsible for running it (either directly or indirectly) and complying with all relevant legislation including superannuation and taxation laws. The Trustee can either be an individual trustee (the member/members) or a company (which the members are directors of). This is distinct from other types of superannuation funds, where members are not involved in managing the fund.

The Trustee has a number of duties which must be strictly complied with:

  1. act honestly in all matters concerning the fund;
  2. exercise skill, care and diligence in managing the fund;
    1. This involves preparing, implementing and regularly reviewing an investment strategy and the performance of investments annually;
  3. act in the best interests of all the members of the fund;
  4. ensure that members only access their super benefits if they have met a legitimate condition of release;
  5. refrain from entering into transactions that circumvent restrictions on the payment of benefits;
  6. ensure that my money and other assets are kept separate from the money and other assets of the fund
    1. Trustees should ensure that the SMSF has its own separate bank account;
  7. take appropriate action to protect the fund’s assets (for example, have sufficient evidence of the ownership of fund assets)
  8. refrain from entering into any contract or do anything that would prevent me from, or hinder me in, properly performing or exercising my functions or powers as a trustee or director of the corporate trustee of the fund;
  9. allow all members of the fund to have access to information and documents as required, including details about:
    1. the financial situation of the fund;
    2. the investments of the fund; and
    3. the members’ benefit entitlements.
  10. Become acquainted with the terms of the trust;
  11. Obey the terms of the trust and act with reasonable care;
  12. Duty to keep and render accounts.
    1. The ATO recommends Trustees keep documents and maintain records for 10 years.
  13. Duty to invest but must do so “exercising the care, diligence and skill that a prudent person would exercise in managing the affairs of other persons” and in accordance with the terms of the trust deed (if specified;
  14. Administer the trust personally;
  15. Avoid conflict and not to profit;
  16. To act impartially between the beneficiaries;

These duties are legislated in the SIS Act, the Trustee Act 1925 (NSW) (and equivalent State and Territory legislation) and arise from equity as fiduciary obligations.

Types of contributions

There are two types of contributions:

  1. Concessional (before-tax) (This can include compulsory contributions, additional employer contributions and salary sacrificed contributions); and
  2. Non-concessional (after tax).

Both concessional and non-concessional contributions are subject to limits on the amount a member can make in any given financial year. These caps can change each financial year.

The cap for concessional contributions for the 2023 financial year is $27,500. Employer made contributions (the mandatory amount provided for in the Superannuation Guarantee) are counted in this cap. Concessional contributions attract a 15% contributions tax.

The cap for non-concessional contributions for the 2023 financial year is $110,000.

These caps can be found on the ATO’s website.


There are prohibitions which apply to SMSFs:

  1. Lending money to or providing financial assistance to another member or a member’s relative;
  2. Acquiring trust assets from members or a related party (a member’s associate);
  3. Entering investments which are not made at an arm’s length (commercial) basis. This is in accordance with the sole purpose; to acquire assets for the benefit of member’s retirement. ;
  4. Borrowing by the SMSF (Section 67) except as set out in the SIS Act (see below Limited Recourse Borrowing Arrangement). This prohibition is in place to limit the SMSF’s exposure to risk and is consistent with the sole purpose. The Fund is not allowed to borrow money in its own right.

There are also very strict rules which apply to Trustees using loans and financial assistance to invest.

An SMSF cannot usually invest more than 5% in “in-house assets” per Section 71(1) of the SIS Act. In house assets include loans or investments to related parties of the funds, an investment which is held in a fund’s “related trust” or a fund’s asset which is leased to a related party.

Growth in SMSFs

In 1999, there were around 200,000 SMSFs worth a total of $55 billion which has grown to 600,000 SMSFs worth a total of $750 billion. SMSFs now account for around one third of Australia’s total superannuation, which is estimated to be around $2.76 trillion.

Purchasing real property through an SMSF

A Trustee may choose to purchase a real property unencumbered using cash or sale proceeds from other investments. If the Fund does not have sufficient cash to purchase a property unencumbered, it may borrow funds using a “Limited Recourse Borrowing Arrangement).

Limited Recourse Borrowing Arrangements

The Trustee of the SMSF can purchase real property or other asset (“acquirable asset”) subject to the usual superannuation rules but will be an equitable owner of that acquirable asset.  The acquirable asset is held in a holding trust (also known as a bare trust, security trust or custodian trust).  The Trustee of the bare Trust is also called a Custodian and is the legal owner of the acquirable asset until the loan is repaid. If the Trustee defaults on the loan, the lender only has recourse to the acquirable asset by taking possession of or disposing of the acquirable asset.  It does not have recourse to other trust property or the personal property of members and is effectively “quarantined” from other fund assets.  This is known as a Limited Recourse Borrowing Arrangement (“LRBA”).

Once the loan is repaid (in one or more repayments), the Trustee of the SMSF will have the right to legal ownership of the acquirable asset.  The asset must be a single asset or multiple identical assets which have the same market value. Borrowed funds can only be used to repair or maintain but not improve property.  This means that if you purchase a “fixer-upper” you will not be able to use borrowed funds to pay for renovations, these will have to be paid from cash funds of the Trust.


In the event of separation, it might be necessary to split the SMSF. This ultimately depends on a number of factors:

  1. Whether it is just and equitable to make an order;
  2. The assessment of contributions;
  3. Whether an adjustment should be made for future needs;
  4. Whether both parties are members of the SMSF;
  5. If only one party is a member, each spouse’s superannuation balance including the a balance of non SMSF Funds such as accumulation interests or defined benefit interests.

You should check the Trust Deed to determine what options are allowed and obtain advice from an expert SMSF adviser, financial adviser, accountant and/or family lawyer.


The accountant for the Fund should be able to provide each party with a valuation of each member’s interest if the investment is solely held in cash and shares. In other cases, where assets are more diverse, an expert valuer will likely need to be appointed , for example where the fund owns real property and the accountant for the Fund can use this valuation to give an overall value of each member’s interest. There are also a number of specialised superannuation valuers, for example, PGS Superannuation Consulting and Super Splitting.

The Clean Break Principle

The Court is required, where possible, “to make such orders as will finally determine the relationship between the parties to a [marriage or de facto relationship] and avoid further proceedings between them” per Section 81 and 90ST of the Family Law Act 1975 (Cth). If both parties are members of the SMSF, the Court will likely be reluctant to make Orders that see both parties remain members of the SMSF for the future.

However, couples may determine (especially after receiving financial advice) that it is in both of their interests to remain in the SMSF which will only work in practice if the couple has a relatively cooperative relationship.

Shares and Real Property

Real property and shares may need to be sold and realised as cash for a superannuation split can occur. This depends on the transferring spouse’s member balance, for example, whether they have sufficient cash for the payment split to the other spouse. The split can also be done by transferring the item of property (e.g. shares or real property) to the other party. For example, if the SMSF owns an investment property worth $1 million and cash of $1 million, the leaving spouse may have a superannuation split in cash or an in species transfer of the investment property. If they take the investment property, they will need to have another SMSF which will own the investment property.

Real Property subject to a LRBA

In the event that the acquirable asset is sold, the bare trust ceases to exist. The sale proceeds can then be realised by the fund as cash assets.

Both Spouses are Members

To remain a compliant fund, all members must be Trustees. Therefore, if both spouses are members and one member wishes to retain the SMSF, the other member will have to resign as Trustee or director of the Trustee Company and member. Usually the member leaving will roll out their balance to another fund, which may or may not be another SMSF.

Structure of Split

It is important to get advice from an SMSF lawyer on the order that steps are taken. The structure of the superannuation split can trigger the SuperStream rules but does not always.

Procedural Matters


For litigation matters, parties should serve the Trustee of the superannuation fund with a copy of their proposed Orders and a Regulation 72 notice.  A Regulation 72 Notice is a signed and dated and written notice with the non-member spouse’s details including their full name, postal address, date of birth and whether they are a member of the fund. For matters by consent, parties should serve the agreed minutes of consent orders or Binding Financial Agreement on the Trustee as soon as the document has been finalised between the parties. The Trustee needs to have been served with the Orders for 28 days unless they provide their consent to be bound earlier.

Payment Split Notice

The Trustee will need to give each party a payment split notice which sets out how the member’s interest is to be split.


The non-member spouse will need to elect how the split will be implemented. This should already be specified in the Orders.

  1. Create a new interest.
  2. Rollover the amount to an existing interest (e.g. in an accumulation fund). A rollover is the transfer or superannuation monies into another compliant fund.
  3. Pay a lump sum (if the non-member spouse is eligible for a cash payment, usually this will require the member spouse to have reached retirement age or otherwise if the non-member spouse is eligible for early release of super).


Trustees are required to report to the ATO when a family law superannuation splitting order is made as these fall within the category of “Transfer Balance Account Reporting” (TBAR ). The Trustee should use the Transfer Balance Event Notification Form.


The rules governing SMSFs are very complex and this adds a further complexity when determining how an SMSF should be dealt with in a separation. It is important to obtain accounting, specialist SMSF, financial and or legal advice when determining whether an SMSF is right for you or if you have an SMSF and are considering or have already separated.


If you need guidance or assistance with splitting a self-managed superannuation interest in Australia in the event of separation, or if you wish to deal with this in a prenup the experienced team at Ramsden Family Law is here to support you at every step. Our dedicated family law practitioners understand the complexities of this area of law and can provide you with tailored advice, drafting and/or advocacy to ensure your rights and interests are protected. Contact Ramsden Family Law today to schedule a consultation, and let us help you navigate your family law journey with confidence and peace of mind. Remember, you don’t have to face this challenging time alone.

The content of this article is intended to provide general guidance to the subject matter and must not be relied on as legal advice and should not be intended ad financial or taxation advice. Specific advice should be sought about your circumstances.