Q&A – Splitting superannuation when a relationship breaks down

A: Alice must confirm her preferred payment method in writing to the superfund trustee within 28 days (or longer if the trustee allows) of receiving notice of Peter's interest being subject to a payment split. 

The following payment options are available in this case, depending on the superfund's trust deed provisions. The superfund trustee can:

• transfer the Alice's payment split amount to Alice's super account in the same fund or
• rollover her payment split amount to Alice's nominated superfund
• if Peter's interest has an unrestricted non-preserved component, that portion can be paid as a lump sum to Alice and the rest must be transferred to Alice's super account
• if Alice meets a condition of release, Alice's payment split amount can be paid as a lump sum directly to her.

The payment must be made within 30 days of Alice making a written request for payment, unless the regulator (ATO or APRA, depending on the type of superfund) allows an extension.

Preservation components

SISR 7A.12 requires the payment split amount to Alice to be consist of the same proportion of preservation components as the member spouse's interest immediately before the split. 

For example, if Peter's interest just before the split is $50,000 / 5.71% (out of $875,000) unrestricted non-preserved component with the remaining balance being preserved, then $28,571 (5.71%) of the $500,000 payment split amount is unrestricted non-preserved. 

For the claim we outlined above, the payment options are:

Option 1

• Pay $28,571 (5.71%) unrestricted non-preserved component of the payment split amount directly as a lump sum to Alice and 
• Transfer or rollover the remaining $471,429 preserved portion to Alice's super account which could be in the same superfund or another superfund; or

Option 2

Transfer or rollover the $500,000 payment split amount which consists of $28,571 unrestricted non-preserved and $471,429 preserved components to Alice's super account which may be in the same superfund or with another superfund.

Alice must meet a condition of release to cash out the preserved component or commence a pension with it.

Tax components

The tax components of the payments must be paid in proportion to the Peter's tax components immediately before the split in line with the proportioning rule, s307.125 ITAA 97. For example, if Peter has interest which composes of 34.29% tax free component ($300,000 out of $875,000) just before the split, the tax components of payment under the options are:

Option 1