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Self-managed super funds and property settlements

Self-managed Super Funds And Property Settlements

Self-Managed Super Funds (SMSFs) are on the rise! Both in numbers and in value of assets held. We make the following general points regarding self-managed super funds and property settlements.

Upon the breakdown of a marriage or partnership, there are the following options regarding self-managed super funds:

  • Both parties stay in the existing SMSF. This is unusual. And generally, not advisable. This could be with or without a splitting order from the member account of one party to the member account of the other party.
  • One party stays in the SMSF and the other party leaves. This is what usually happens. The leaving party usually sets up an account in an industry or retail fund, although they could establish their own SMSF.
  • Both parties leave the SMSF and it is wound up.

Let’s assume the following:

  • The members of the fund are the husband and wife.
  • There is a corporate trustee. The husband and wife are shareholders and directors.
  • The husband is staying in the SMSF. The wife is leaving.
  • The wife receives a super-split from the husband.

Once the court order is made, some of the matters that need to be attended to include:

  • The service of the Order on the trustees.
  • The wife providing the trustees with the notice pursuant to Regulation 72 of the Family Law (Superannuation) Regulations 2001.
  • The trustees giving a payment split notice both to the husband and wife.
  • The trustees giving the wife a written notice pursuant to Regulation 2.36C of the Superannuation Industry (Supervision) Regulations 1994 (“the SIS Regulations”).
  • If applicable, the wife makes the appropriate request pursuant to Division 7A.2 of the SIS Regulations.
  • The trustees give the appropriate written notices to the husband and wife pursuant to Division 7A.2 of the SIS Regulations.
  • The calculation and the transfer of the benefit to the wife’s new super fund.
  • The wife:
    • Resigns as a member.
    • Resigns as a Director of the trustee company.
    • Transfers to the husband her shareholding in the trustee company.

When an SMSF owns real estate (or other ‘lumpy’ assets) and little cash and/or shares, the real estate may need to be sold to allow each party to receive an appropriate share of the superannuation entitlement. This may trigger CGT.

An asset, e.g. an investment property, can be transferred from one SMSF to another SMSF. Capital gains tax rollover relief is available. Some public offer funds also accept rollover of particular assets.

Insurance and binding death benefit nominations need to be considered.

If you need any advice regarding self-managed super funds and property settlements or another family law matter, contact us on (02) 4929 3995.

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