Super and Life Events — Divorce, Death, Parental Leave and More

By Peakifi Editorial Team · Updated

This article provides general information only and does not constitute financial advice. For advice tailored to your situation, consult a licensed financial adviser. Learn more.

Contents

Super doesn’t pause during life’s big moments. Whether you’re separating from a partner, welcoming a baby, changing jobs, going through redundancy, or planning your estate, super plays an important role — and the rules are often different from other assets. Getting super right during life events prevents costly mistakes.

Super and Relationship Breakdown

Super as Matrimonial Property

Superannuation is treated as property for the purposes of Australian family law under the Family Law Act 1975. When a relationship breaks down — whether married or de facto — super can be split between parties as part of a property settlement.

Super cannot simply be divided like a bank account. There are two mechanisms:

Superannuation agreement (consent order): The parties agree to a super split and formalise it in a Binding Financial Agreement or Consent Order approved by a court. The agreed split is then implemented directly by the super fund.

Flagging order: Places a “flag” on the super account to prevent the fund from paying benefits until the flag is lifted or the split is resolved by a subsequent order. Used when the parties can’t agree immediately but want to preserve the asset.

A super split doesn’t immediately give one party access to the other’s super — the split portion is rolled into the receiving party’s own super account and remains subject to normal preservation rules.

Binding Death Benefit Nominations and Relationships

When you separate, your existing binding death benefit nomination (which may name your former partner) doesn’t automatically change. You must update your nomination. If you die without updating it and the fund exercises trustee discretion, your estate may not go where you intended.

Updating your death benefit nomination immediately after separation is one of the most important administrative steps.

Super and Death — Estate Planning

Who Gets Your Super When You Die?

Super does not automatically form part of your estate. It is a trust structure, and when you die, the trustee of your super fund has the power (and by default the discretion) to decide who receives your death benefit — unless you have given them binding instructions.

Without a Binding Death Benefit Nomination (BDBN): The fund trustee exercises discretion. They will generally pay to your financial dependants or your estate — but the outcome is not guaranteed.

With a valid BDBN: The trustee must pay according to your nomination (subject to it being valid at the time of death).

BDBNs can nominate:

  • Your estate (in which case the distribution follows your will)
  • Specific dependants: spouse or de facto partner, children (of any age if financially dependent; only under-18s without financial dependency), or anyone in an interdependent relationship with you

Non-dependants (adult children, siblings, parents) cannot be nominated as direct BDBN recipients — only the estate. Benefits paid to the estate are then distributed per your will and taxed accordingly.

Tax on Death Benefits

Death benefits paid directly to tax dependants (spouse, de facto, financial dependants, under-18s) are tax-free.

Death benefits paid to non-dependants via the estate or directly (where permitted) include a taxable component taxed at 17% (15% tax + 2% Medicare levy).

This tax differential makes estate planning for super particularly important for members who wish to leave super to adult children.

Super and Parental Leave

Government-Funded Parental Leave Pay and Super

From 1 July 2025, the Australian Government’s Parental Leave Pay scheme includes a superannuation contribution on top of the base PPL payment. This was a significant change — previously, government-funded PPL was one of the only income payments that didn’t attract super.

The super contribution is calculated at the SG rate (11.5% in FY2025–26) on the PPL payment, paid by the ATO into the parent’s super fund. For a 26-week PPL period (the 2025 scheme length), this amounts to approximately $2,800–$3,000 in additional super.

Employer-Funded Parental Leave Pay and Super

Many larger employers provide parental leave pay in addition to (or integrated with) the government scheme. Employer-funded parental leave is ordinary time earnings, meaning your employer’s super obligation (the SG rate) applies on top of it.

Whether your employer pays super on their parental leave payment depends on whether it is classified as ordinary time earnings in your enterprise agreement or employment contract. Most enterprise agreement parental leave provisions include super.

Career Breaks and Super Gaps

A career break — whether for parenting, study, illness, or other reasons — means no employer contributions during that period. The super balance doesn’t decline but also doesn’t receive its normal contribution flow.

What to do during a career break:

  • Keep the account active (contributions aren’t legally required to maintain the account)
  • Check whether the account is at risk of becoming “inactive” under the Protecting Your Super reforms (no contributions for 16 months can trigger insurance cancellation and potential account transfer to the ATO)
  • Make personal contributions during the break if financially possible — even small amounts keep the account active and add to the balance

Super and Redundancy

Redundancy Pay — Taxed Separately from Super

Redundancy payment is taxed differently from a super lump sum. A genuine redundancy payment receives:

  • A tax-free component (base amount plus years-of-service component, based on ATO thresholds for each income year)
  • The excess is taxed as an employment termination payment (ETP), with specific tax rates

This is separate from any super balance you have accumulated — your super entitlements are not affected by redundancy unless you access them.

What Happens to Super When You’re Retrenched

When you are made redundant, your super remains in your super fund. If you meet a condition of release (e.g., you are 60 and permanently retire, or reach preservation age and meet the retirement condition), you can access it. Most people under 60 cannot access super following redundancy without meeting another condition of release (e.g., financial hardship, terminal illness).

Your employer must pay any outstanding super contributions as part of the redundancy settlement — unpaid super is a priority debt in insolvency.

Super and Changing Jobs

From 1 November 2021, super stapling means your existing super account follows you to a new employer, rather than your new employer defaulting you into their fund. When you start a new job:

  1. Your employer must pay super to your nominated fund (or check whether you have a stapled fund)
  2. If you have an existing super account, your new employer is directed to pay contributions there
  3. You can actively nominate any complying super fund to receive contributions from a new employer

Always provide your new employer with your TFN and fund details at the start of employment to avoid delays in contributions and excess tax on contributions without a TFN.

Frequently Asked Questions

Can I access my super after being made redundant? Not automatically. Redundancy is not itself a condition of release. If you meet another condition (preservation age and retirement, age 65, terminal illness, financial hardship), you can access it. Most people under 60 cannot access super solely because they lost their job.

Does super count in a divorce settlement? Yes. Super is treated as property under the Family Law Act. A court can order a super split as part of a property settlement, regardless of whose name the super is in.

What happens to super if I die without a nomination? The fund trustee exercises discretion and will typically pay to your financial dependants or your estate. Without a valid nomination, there is no guarantee the money goes where you intend.

Life Events Guides

For legal or financial advice tailored to your situation, speak with a licensed financial adviser or solicitor. You can find a financial adviser through MoneySmart.

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