Moving one member’s Super Holdings Out

By March 16, 2022 Blogs

If one of the members of an SMSF wishes to rollover their superannuation benefit, it must be rolled out of the SMSF into another Retail / Industry / Government Fund. Separating an individual member’s superannuation assets from other members’ assets in an SMSF is often not easy.

Step 1: First take stock of the types of assets held

Eg: Property, Shares, Gold or Crypto

Step 2: Second, if assets are illiquid; like with a property; you may need to come to an arrangement to sell and split the asset proceeds or use other funds to manage the members rollover requirements. Further, an asset may have fallen in value, where this decision can become more complicated and detrimental to the remaining members of the smsf.

Warning: Seek Advice on these arrangements, both financial and legal

The Super laws require that all members agree to the departure of one member, specially in the case of a divorce.

Step 3: Refer to the funds SMSF Trust Deed. The deed will detail the steps that need to be taken and in some instances, it may not require agreement by all members of the SMSF. If your fund is an individual trustee fund, the remaining member may wish to change the fund to a corporate trustee structure or find another member to replace the departing members as individual trustee SMSF’s require two members as a minimum in a fund.

For individual trustee funds, where assets such as property are held, it is best to seek advice on the GCT implications, if any, where a change to the funds members is made.

Step 4:  A detailed list of steps for SMSF members leaving an SMSF

  • Minute a meeting to remove the member
  • Dispose of assets required to pay out member benefits or seek advice to determine an alternative method
  • Remove the member as a Director of the corporate Trustee company and notify ASIC and completing a form 484 via the Asic online portal or by engaging your administration provider or accountant.
  • Complete the ATO change Forms and post these out to the ATO
  • Once assets are sold, the departing member must setup a new retail/industry super fund account and roll out the agreed super benefit amount.
  • Once the SMSF tax return is completed, the member exit will be recorded as with changes to assets and balances
  • A benefit rollover statement will be issued by My SMSF where the departing member can hold this on record and provide this to the new super fund provider.
  • Update the funds trust deed to account for the changes to the fund
  • Finally update the SMSF Cash Account provider on the exiting member

In the event of Divorce and settlements

In the event of a divorce or de-facto separation purposes superannuation is treated as property under the Family Law Act 1975. In the case of divorces, you would expect that both parties would agree if one party wanted to leave an SMSF.

The parties could apply to the Family Court for a court order concerning the division of property. The SMSF assets and the superannuation benefits of each member would have to be valued – usually by using an independent valuation – and the court order would use that valuation.

If the two divorcing or separating parties are able to reach an agreement, they could apply for Consent Orders, or if there is no agreement, Court Orders would be obtained through a court hearing – a potentially time-consuming and expensive process.

The court decision could force the dissenting party to consent to the departure of the trustee, with their benefits, but in some cases – especially if it wasn’t a corporate trustee structure – they may decide a wind-up of the SMSF is the best option

No matter what your circumstances are, seek legal and financial advice when an SMSF removes a member of the fund as the financial and legal implications may be significant.

Leave a Reply