Spousal maintenance for retirees post-separation: when periodic payments fill the gap

When an Australian couple separates in retirement or in the late-career years leading up to retirement, the property settlement — division of the accumulated wealth including super, the home, and other assets — is typically the dominant financial issue. But for some separating couples, the property settlement (even with superannuation splitting) does not fully address the ongoing income disparity between the parties. Where one partner has substantial pension and super-pension income while the other has minimal personal income, the family law system can order spousal maintenance — periodic or lump-sum payments from the higher-income partner to the lower-income partner to support living expenses. Section 72 of the Family Law Act 1975 establishes the maintenance obligation between married parties — a party is liable to maintain the other to the extent the first party is reasonably able to do so, where the other party cannot adequately support themselves by reason of age, physical or mental incapacity for appropriate gainful employment, the care of a child under 18, or any other adequate reason. The equivalent provisions for de facto partners are in section 90SF, applying to separations on or after 1 March 2009 in all states except Western Australia. For retirees facing late-life separation — particularly in long-relationship cases where one party was the primary earner and the other the primary homemaker — understanding when spousal maintenance applies, how it interacts with the broader settlement, and what the tax and Centrelink consequences are is essential to a complete financial settlement.

The spousal maintenance framework under section 72 has two distinct elements that must both be satisfied. First, there must be need on one side: the party seeking maintenance must be unable to adequately support themselves, with the court considering the section 75(2) factors — age, health, ability to work, the standard of living during the relationship, the duration of the relationship and its impact on earning capacity, the financial resources of each party, and so on. Second, there must be capacity on the other side: the party against whom maintenance is sought must be reasonably able to provide it, after accounting for their own income, assets, liabilities, and reasonable living expenses. Both elements are required — a wealthy retiree paired with a wealthy retiree doesn't trigger maintenance (no need); a low-income retiree paired with a low-income retiree doesn't trigger maintenance (no capacity); the typical late-life case involves clear disparity between the parties' post-settlement income positions. The court has discretion in making maintenance orders — it is not automatic where there is a disparity, and the court weighs the specific facts of each case.

The distinction between maintenance and property settlement is important and often conflated. Property settlement is the one-off division of the matrimonial property pool — addressed through binding financial agreements, consent orders, or contested court orders. It typically resolves super (with splitting orders under Part VIIIB of the Family Law Act), the home, investment properties, share portfolios, business interests, and other assets into the parties' separate ownership. Spousal maintenance is ongoing periodic payments (or a capitalised lump sum) from one party to the other for a specified period — typically monthly or fortnightly transfers from the higher-income party to the lower-income party. The two can interact: a generous property settlement that provides the lower-income party with substantial income-generating assets may eliminate the need for ongoing maintenance, because they can support themselves from their own assets. Conversely, a property settlement that is asset-rich for one party but doesn't address the other party's ongoing income needs leaves the maintenance question open. In well-structured late-life separations, the property settlement (particularly with super splitting) typically eliminates or significantly reduces the need for ongoing maintenance — but in cases with constrained property pools or significant income asymmetries, maintenance remains relevant.

The classic late-life maintenance scenario is the long-relationship homemaker. A 30-year marriage; the husband worked as a senior executive accumulating substantial super (say $1.5M) and is now drawing a sizeable account-based pension plus a defined benefit pension. The wife was primarily the homemaker, supplemented by some part-time work over the years; her own super is modest ($80,000) and she has no other income-generating assets in her own name. A 50/50 super split through the property settlement gives her $790,000 — substantial, but the husband retains his ongoing DB pension stream that wasn't fully captured in the split. Her ongoing pension income from her share of super (post-split) is approximately $40,000/year; his combined super pension and DB pension income post-split is $85,000-$90,000/year. The gap may justify spousal maintenance — periodic payments from him to her to reduce the disparity. Whether the court orders maintenance, and at what level, depends on the specific facts: her ability to work and earn (typically minimal for a 60+ retiree), her health, the standard of living during the marriage, his other financial commitments, and so on. The discretionary nature of the order means outcomes vary, but the framework provides a mechanism for addressing the gap when it exists.

The form of payment can be periodic, lump sum, or a combination. The traditional form is periodic payments — regular weekly, fortnightly, or monthly transfers from the payer to the recipient. This creates an ongoing financial relationship between the separated parties, with the payer's obligation continuing for the duration of the order. Lump sum maintenance capitalises future maintenance into a single payment — sometimes used where the parties want a clean break with no ongoing financial entanglement. The challenge with lump-sum capitalisation is the actuarial assumptions: how long will the recipient live? What level of ongoing support represents adequate maintenance? What return assumption applies to the lump sum? These assumptions can be contentious, and the lump sum approach requires both parties to agree on a discount rate and a life-expectancy assumption. For late-life clients who want a clean break, lump sum capitalisation is appealing despite the complexity — it removes the ongoing financial relationship and allows both parties to plan with certainty.

The tax treatment of spousal maintenance is favourable and is one of the few features of the family law financial framework that is straightforward. Spousal maintenance paid pursuant to a court order or formal agreement is generally NOT deductible to the payer and NOT assessable income to the recipient. The maintenance is paid from the payer's after-tax funds and received by the recipient tax-free — the payment flows on a post-tax basis at both ends. This is different from ordinary employment income, deductible super contributions, or interest/dividend income, all of which produce tax consequences. For retirees structuring maintenance arrangements, the tax-neutral nature simplifies the analysis: the payment is a transfer of after-tax dollars, no more and no less.

The Centrelink treatment is the area where the article's natural intuition is wrong, and where the Social Security Guide is unambiguous. Under DSS Guide 4.3.9.10, spousal maintenance received by a former partner is not assessed as ordinary income under the income test for income support purposes — the recipient's Age Pension is not reduced by the maintenance they receive. For the payer, the position depends on whether the agreement is legally enforceable. Where the payer's former partner has a legally enforceable right to the maintenance — typically a Family Court consent order or a formal legal agreement drawn up by a solicitor — the amount paid is not treated as income of the paying party (i.e. it is effectively excluded from the payer's income for the income test). Where the arrangement is informal or not legally enforceable, the payer's gross income is used and no deduction is allowed. The practical effect is that a properly documented spousal maintenance order is doubly favourable for the Age Pension means test: the recipient's pension is not reduced, and the payer's pension (if any) may actually increase because their assessable income is lower by the amount paid. The article's natural intuition — that maintenance increases the recipient's Centrelink-assessable income — is the wrong way round under current DSS policy, and is one of the trap areas advisers commonly get wrong.

The modification and termination provisions allow the maintenance arrangement to change as circumstances do. Either party can apply to court to vary the maintenance if their circumstances change materially: the payer's income drops (e.g., their pension reduces or they incur new commitments); the recipient gains employment or other income; the recipient remarries (which typically terminates maintenance from the previous partner unless the order specifies otherwise — section 82(4) of the Family Law Act); the recipient enters a new de facto relationship; the recipient's health or living costs change significantly. For late-life cases, the relative stability of retirement income (compared to working-age income that fluctuates with employment) means modification is less common than in younger separations — but it remains available. Maintenance also ceases on the death of either party (section 82(2) and (3)). For estate planning purposes, this means a payer's death ends the maintenance obligation (the payer's estate is not generally on the hook for ongoing maintenance to the former spouse, unless the order or agreement specifically provides otherwise), and a recipient's death ends the receipt.

What do worked planning examples show?

These two cases show how spousal maintenance applies in late-life separation. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Robert (68) and Helen (66), married 38 years, separating. Robert worked as a senior consultant; his super is $1.4M with an $80,000/year ABP plus a $50,000/year DB pension. Helen was primarily a homemaker with periodic part-time work; her own super is $90,000. The property settlement splits Robert's super 50/50, giving Helen $700,000 (combined with her own $90,000 = $790,000). Helen's post-settlement income will be approximately $40,000/year from her share. Robert retains the DB pension stream worth $50,000/year and the ABP income from his $700,000 share — about $35,000/year ABP + $50,000 DB = $85,000/year. On these facts, even after a 50/50 super split, Robert has approximately $85,000/year of income while Helen has approximately $40,000/year — a gap of $45,000/year. Helen may apply for spousal maintenance. The court might order, say, $20,000/year in periodic maintenance, closing some of the gap. Tax: not deductible to Robert; not assessable to Helen. Centrelink: Helen's $20,000 of maintenance is not added to her income-test assessable income, so her Age Pension is not reduced by it; if Robert's order is a formal court order, the $20,000 is excluded from Robert's assessable income too, so his Age Pension test position improves to that extent. Net effect: the $20,000 transfers from Robert to Helen on a tax-free and means-test-favourable basis at both ends. On these facts the rational structure is a formal court order or consent order (not an informal arrangement) so both the tax-neutral treatment and the income-test deduction for Robert are preserved. Specialist family law advice is essential for the structuring.

Case 2 — Margaret (72) and George (74), separating after 50 years of marriage. They have a $1.2M home (jointly owned), combined super of $400,000, and modest other assets. Both already receive the Age Pension. On these facts, both parties' needs are real but neither has substantial capacity to maintain the other. The property settlement is constrained — the family home is the major asset, and selling and dividing it would leave each with around $600,000 plus their super share, but neither has substantial ongoing income beyond the Age Pension. Spousal maintenance is unlikely to be ordered because the capacity element of section 72 is not satisfied on either side. The settlement will focus on the property division — sale of the home, division of the super, distribution of other assets — and on ensuring both parties have adequate housing post-separation. The general point this illustrates is that spousal maintenance applies where both need and capacity are present. In smaller estates with both parties already on the Age Pension, maintenance is generally not relevant — the planning conversation is dominated by the property settlement and the post-separation housing question.

For retirees facing late-life separation, spousal maintenance is one element of the broader financial settlement that should be considered alongside property division, super splitting, and Centrelink/Age Pension implications. The advice work is to combine the maintenance analysis with the property settlement (don't treat them in isolation), model both parties' post-settlement income positions to identify any significant gaps, consider lump sum capitalisation for clients who want a clean break, structure the arrangement as a formal court order or consent order to preserve the favourable Centrelink treatment for both parties (recipient: maintenance not income; payer with formal order: deducted from income), coordinate with a specialist family law solicitor on the formal arrangement, and integrate the maintenance arrangement with each party's broader retirement income planning. For many late-life separations, a generous super-splitting property settlement eliminates the need for ongoing maintenance — but where the property pool is constrained or the income asymmetry is significant, maintenance remains a meaningful component of the settlement.

Sources

• fcfcoa.gov.au — Spousal maintenance
• DSS Social Security Guide
• Federal Register of Legislation — Latest
• Services Australia — Income
• Australian Taxation Office (ATO) — Government payments pensions and allowances