In most cases, no immediate tax is payable when superannuation is split between separating partners. Super splitting is treated as a rollover rather than a withdrawal, which means it simply moves from one fund to another, without triggering tax at the time of the split.

However, tax may apply later, depending on:

• The type of super contributions made (concessional or non-concessional)
• When and how the super is eventually accessed, such as through retirement or withdrawal

Although the split itself isn’t taxable, tax can apply when super is accessed, typically after retirement age. Here's what to know:

• If accessed after preservation age and under current super rules, super may be tax-free or taxed at a lower rate, depending on your age and the type of fund.
• If withdrawn before preservation age, it may attract higher tax rates.
• Any taxable components (like employer contributions or salary sacrifice) are taxed differently from tax-free components (like after-tax contributions).

This means that while there’s no immediate tax cost in a settlement, the long-term tax impact of receiving super as part of your share should still be considered.

One common question is whether capital gains tax applies to super splitting. The answer: No, CGT does not apply to superannuation splitting because the asset (the super balance) isn’t being sold, it's being transferred under a family law obligation.

However, CGT may apply to other assets split during a settlement, like property or shares. It’s important to consider the broader tax picture when negotiating your settlement.

Different Tax Treatments for Different Funds
Some self-managed super funds (SMSFs) may have different tax reporting requirements when splitting super. Always check with your fund administrator or financial adviser.

Receiving Party Should Check Fund Fees and Conditions
The person receiving super should check for entry fees, insurance coverage, and whether the receiving fund allows contributions of that type.

Legal and Financial Advice Is Key
Because tax laws and super rules can change, and every situation is different, professional advice is essential when including super in a settlement.

While superannuation splitting doesn’t usually lead to an immediate tax bill, it’s important to understand how it could affect your future tax position, especially when it comes time to access those funds. Factoring in the tax implications now can help ensure a fair and practical property settlement. If you’re unsure how super splitting might affect you or what your entitlements are, speaking with a family lawyer or financial adviser can make the process much clearer and give you peace of mind.