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Commercial Employment Law Estate Planning Family General

The (Not so) Self Managed Super Fund

21.07.2022

Any Superannuation fund is basically a trust fund.

You invest property into the trust, which the trustee controls (the Super fund) and you (the beneficiary) receive the trust assets (superannuation) upon certain events occurring (retirement).

Information about the super fund that you have is important for family law purposes and separation because your super may be subject to property division just like any other asset. Comprehensive and independent professional advice is required to set up a Self-Managed Super Fund (SMSF) in order to be compliant with company regulations and tax laws.

Self-Managed Super Funds (SMSFs) have become more and more popular over the last decade because people want to be in more control of their retirement and understandably so.

SMSFs are a bit different though, in terms of trust laws anyway. A trust cannot be a trust if the trustee is also a beneficiary.

This seems to be contradictory to the above example of ‘normal’ super funds. However, the trust laws specifically say that for a SMSF to exist:

• Each member (beneficiary) of the fund is a trustee, and
• The fund has less than 5 members.

The SMSF is essentially set up similar to a trust, where assets are held for the listed beneficiaries.

One distinct way that SMSFs differ from other trusts is that the trustee, the person who has control of the trust assets, must also be a beneficiary of the trust assets.

The standard superannuation fund contains funds which are contributed by your employer and you.

It is a forced retirement savings account. However, a whole range of assets can be transferred into a SMSF.

So how do these assets get split in a superannuation splitting order when a couple has separated?

For example, a married couple, Tommy and Gina, have set up a Mum and Dad SMSF, where they are both trustees and beneficiaries.

After a number of years of marriage, they decide to separate and settle their property and financial affairs.

Tommy and Gina have reached agreement for the division of their assets and this includes a payment split of the party’s superannuation interest.

Yet the cash in the SMSF is not enough to cover the payment split, but there are a number of other assets, usually properties.

Where this gets complicated is that specific advice is required to ensure that one party’s entitlement is appropriately transferred to the other.

For example, Tommy and Gina will need to see their Accountant and perhaps a Real Estate Agent so that the assets of the SMSF can be valued appropriately. The Tommy and Gina will also need legal advice to ensure that at all times, their SMSF remains a complying fund for tax purposes to avoid penalties.

Extreme caution will also have to be taken to ensure that when the Tommy and/or Gina resign from their position as Trustee, there are not any further penalties imposed by the ATO.

When it comes to separation and dealing with a SMSF, it becomes a very complex area because regard must be given to the Family and Superannuation laws and regulations, the ASIC laws and regulations and the Tax laws.

It is important to seek legal advice and other independent advice regarding your SMSF upon separation.

Our Team at Keir Steele Waldon Lawyers are able to provide you with advice regarding all circumstances arising out of a separation.

Please Contact Our Team today to discuss the implication separation will have on your SMSF and how you can best plan for a smooth transition.

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