Divorce & SMSFs

Meg Heffron

Managing Director

When couples separate, the law allows them to split up their super (ie, effectively give some of one person’s super to the other.) But where an SMSF is involved, there can be some extra steps. We have 4 tips for separating couples.

First – and maybe this is the most obvious – don’t leave it all to the lawyers. They will expertly advise on the legal parts but super is a valuable retirement asset with many dimensions beyond just an account balance. Getting your SMSF accountant / administrator and (if applicable) financial adviser involved early will be invaluable. Not only can they get cracking on some of the SMSF-specific issues below but they can also help with the considerations beyond just the amount of the split. For example, each super account has a unique make up when it comes to “tax components” (which mostly influences how much tax your children will pay on your super if they inherit it) and “preservation” (which drives when you can access the super if you’re still under 65).

A second tip is to start with the end in mind. Often, both members of the couple belong to the same SMSF and part of the process will be moving one of them to a new fund (even a new SMSF). Work out where the money will go well before it needs to go there. It may be necessary to set up a new super account or even a new SMSF. Some of these things take time.

Remember that most SMSFs don’t report member balances every day and yet the super splitting rules work on the assumption that all balances can be worked out and transferred out of the fund within a few days of the super agreement or court orders being issued. Do this work ahead of time so you’re ready when the clock starts (Tip 3).

Finally, remember an SMSF is different to a public fund in that the members not only “belong” (ie, have their super in it), they also run it (they’re the trustees). Extricating one person from the fund is more than just taking out their money – it also involves resigning as a trustee, transferring ownership of any shares in the company that is the trustee etc.

We’ve recently added a client guide that covers these issues and more for separating couples. You can access it here.

This article is for general information only. It does not constitute financial product advice and has been prepared without taking into account any individual’s personal objectives, situation or needs. It is not intended to be a complete summary of the issues and should not be relied upon without seeking advice specific to your circumstances.