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Superannuation and divorce

March 2019

Two member SMSF’s currently make up approximately 93% of all SMSF’s and usually these two members are a couple. Therefore, when a relationship breakdown occurs the superannuation balances are included in the pool of assets to be split and advice needs to be obtained prior to any decision is made. The options available are:

  • Each member maintains their own superannuation benefits
  • Split the benefits via a payment split or interest split which involves one member receiving a portion of the other member’s benefits.
  • Flag the benefits which essentially freezes the benefits within a fund for a payment split to occur at a later date.

Splitting of superannuation can only occur via a binding financial agreement, consent order to split superannuation or a court order.

Before making a decision regarding superannuation the following should be considered:

  • Members age and timing of access to superannuation
  • Taxable/tax free component of member balances
  • Members Transfer Balance Cap and Total Superannuation Balance
  • Underlying assets supporting member balances and funding of any payment
  • Capital Gains Tax concessions available under a superannuation split
  • Trusteeship of the SMSF – individual trustees vs corporate trustee
  • Binding Death Benefit Nomination

Timing is the most important aspect of relationship breakdowns involving superannuation and therefore advice with respect to the superannuation benefits of the couple needs to be considered as early as possible into the process.

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Topics: Superannuation

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