A fact of life
It is a sad, yet unavoidable fact of life that many domestic partnerships, be they by marriage or functioning as de facto relationships, do not last. Such occurrences of separation and perhaps ultimate divorce are stressful on many levels, with multiple and often interconnecting considerations. There may be joint business holdings, co-ownership of property, physical assets, and the incredibly emotionally charged consideration of children.
Another factor to toss into the pot is the issue of superannuation. Couples may have individual superannuation holdings, or they may jointly operate their own Self Managed Super Fund (SMSF).
When the time comes, the holdings of the SMSF are included along with all other assets to distribute accumulated wealth appropriately.
Timeframes
A party in a marriage break-up must make a claim for superannuation within 12 months of divorce, or if no divorce is imminent, then within 12 months of separation.
For a party in a de facto relationship to make a claim, they must have been in that relationship for 2 years, except where there are children from the relationship, in which case the 2-year requirement does not apply. Further, a claim must be made within 2 years of separation.
Fair and equitable
It is possible for couples to establish their own financial agreement in apportioning assets. If not, they can allow the Court to follow established protocols to make that arrangement for them. Either way, Consent Orders will be issued by the Court and will be binding upon both parties, and the trustee of the fund. It is imperative to understand that splitting a fund can only be done if directed by a Court order.
The assets of a SMSF will be included within that division, however, while a 50:50 split of the fund is possible, it does not have to be done that way – it is the overall distribution of joint assets that matters.
In any event, once a split has been decided upon, there are established processes to follow to make enquiries to the trustee of the fund. However, with a SMSF, as opposed to an industry fund, it is likely that the individual in the break-up will also be the trustee of the fund. Depending upon the make-up of the assets held – shares, property, cash – decisions will need to be made to facilitate a suitable apportioning.
Whether a person prefers to receive non-superannuation assets, or assets held within the superannuation structure, will depend entirely upon individual circumstances, particularly relating to age and proximity to retirement. One fact remains inviolate however: assets within a SMSF (or any other type of fund for that matter) must remain within superannuation. That is, assets from within the fund cannot normally be cashed out, unless in compliance with Superannuation laws.
Since one person cannot operate a SMSF as sole trustee/member, if one party leaves it may be necessary to re-establish the fund using a corporate trustee, with the remaining member as a director. That arrangement is allowed.
Once the apportionment for a party is decided, they may elect to create a new interest within the same fund. While technically possible, this option may be unwieldy, particularly when the separation is acrimonious. Where transfer to another complying SMSF is made, it is imperative that proper procedures are followed to avoid triggering a Capital Gains Tax event.
Dividing the assets of a SMSF can be an onerous task, making it imperative to obtain sound professional advice throughout. There will be enough potentially stressful issues without adding this one to the list.
If you are considering a separation and you have combined assets, make sure you get the right advice. Contact Owen Hodge Lawyers for personalized advice on your situation today!