Going through a separation or divorce is stressful in various ways, with many interconnecting assets and things to consider. For example, parties may need to think about joint business holdings, physical assets, joint ownership of property, not to mention the emotionally charged consideration of children.
Alongside these factors, couples who are undergoing a breakup also need to consider superannuation, as they may have individual superannuation holdings or may be jointly operating their own Self-Managed Super Funds (SMSF). This, along with all other assets, will need to be distributed to both parties.
Timeframes to consider
When considering the division of superannuation, including SMSF, parties need to consider relevant timeframes, i.e. limitation period.
For example, a party who was in a marriage must make a claim for superannuation within 12 months of divorce.
Whereas parties who were in a de facto relationship must make a claim within 2 years of separation, and must have been in that relationship for a minimum of 2 years, unless the parties have a child or children from that relationship, in which case the requirement of being together for 2 years is void.
Dividing the assets of an SMSF: Fair and equitable
If the parties have reached an agreement, they can decide to establish their own financial agreement in relation to apportioning assets or allow the Court to do this for them by way of a consent order.
Whilst a 50:50 split of this fund is possible, it is not always finalised this way, as it is the overall distribution of joint assets that matters. Regardless, once a split has been decided on, there are established processes that must be followed to make enquiries to the trustee of the fund. Within an SMSF, it is possible that an individual in the breakup is also the trustee of the fund. Should this be the case, decisions need to be made to facilitate appropriate distribution, depending on the assets held – cash, shares or property.
Should an individual in the breakup prefer to receive non-superannuation assets or assets held within the superannuation structure, their individual circumstances will be considered. This will be in relation to their age and proximity to retirement. However, one fact remains unchanged, and that is that assets within an SMSF or any other type of fund must remain within superannuation. This means that unless in compliance with Superannuation laws, assets from within the fund cannot be cashed out.
A singular person may not operate an SMSF as a sole trustee. Thus, should one party leave, it may be required to re-establish the fund through using a corporate trustee. This means that the remaining member will be the director.
After the distribution of the funds has been decided for an individual, they may choose to create a new interest within the same fund. Although this is possible, this option may be difficult should the nature of the separation be acrimonious. However, where a transfer to another complying SMSF is made, proper procedures must be followed to avoid a Capital Gains Tax event.
The division of assets of an SMSF can be tedious, thus, it is essential that sound professional advice is obtained to ensure the process is as streamlined as possible.
