SMSF & Seperation
SMSF, separation and divorce – A Guide to managing your Super
According to the ABS, 42.7%* of marriages end in divorce and believe it or not many SMSF are facing this issue.
So here are some steps to assist you manage your SMSF separation or divorce
- Leave the SMSF assets untouched till a later date or a trigger event
- Split your SMSF assets
This is the most common step that most couples take and here are two ways to approach a split. Super assets in a union are divisible by a court order or by agreement (refer to family law act 1975 and the SIS Act 1993)
- Try and to get an agreement with your spouse so that you can divide your super equally or provide additional funds, based on a mutual agreement. You can then decide on who maintains the SMSF and who rolls out their super to a retail fund or who sets up another SMSF.
From our practice experience, this is what we suggest that our clients do and usually the male partner maintains the SMSF as it is their family name which is used as the funds legal name, typically.
- If the separation is not amicable, typically each partner engages a lawyer and these are some steps to take.
Steps to take when splitting your super:
- Contact your SMSF Administrator or accountant and request the funds
- Last tax return and member statements
Often the value of the funds’ assets is reflected in your last completed tax return. The members statements will highlight what each member brought in and how much each member contributed. The financial statement will identify the fund’s total assets and liabilities
- Remember where you hold property, particularly with a loan, you will need to
Be able to fund the loan on one super contribution and the properties rental income, so that a lender will allow you to refinance the loan. The alternative of course is to sell the property. This is why option (1) can be great if both parties can agree to wait till more debt is paid off or till markets rise and valuations are far better. Often, this is not possible given the emotions involved in the situation.
- Obtain an up to date valuation on properties and listed investments
- Online valuations for property and a portfolio or investment report for shares, etf’s
- Try and agree on a split of assets or apply for a court order
- Document your split of assets and get an independent legal sign off
- Inform the super fund administrator or accountant of the court’s decision
- Decide on who maintain the fund and who rolls out
A good first step is to approach your SMSF provider or administrator. You will find that they have had experience with SMSF splits and they can provide you with some great general information to get you started. Seek financial advice on separation strategies and seek legal advice when all else fails to obtain a settlement on your super assets. We suggest you approach lawyers as a last resort as the costs can be extremely high when engaging lawyers on smsf splits.
It’s important to remember that SMSF and super assets can be successioned, without involving other assets and your estate. Super cannot be accessed or moved overseas, until a condition of release is met, therefore option (1) again can result in the best outcome for a couple who finds themselves in this situation.
This article is concerned with SMSF assets in the main. We understand that a separation or divorce will involve other assets such as a family home, investments and personal belongings.Where couples hold significant assets in multiple structures, sound legal advice is often the best option. For most Australians that own a home and have assets in super, these guidelines will save you time, money and a lot of heartache.
Warning: This is general information only, seek appropriate legal advice before proceeding further.