Were you aware that a self-managed superannuation fund (SMSF) could be split at the end of a marriage or de facto relationship?

Superannuation is treated as property for the purposes of division of assets after the breakdown of a marriage or a de facto relationship. During negotiations between parties, lawyers, at mediation or a Court, your superannuation entitlements will be treated the same as your family home, car and other assets.

Section 90XC of the Family Law Act 1975 states that ‘a superannuation interest is to be treated as property for the purposes….of the definition of matrimonial cause’ and ‘a superannuation interest is to be treated as property for the purposes….of the definition of de facto financial cause’.

Self-Managed Superannuation Funds (SMSFs) have become more popular as an option for parties, in particular married couples. In June 2022, the Australian Taxation Office reported that there were 603,432 SMSFs in Australia. In June 2021, 69% of SMSFs had 2 members, typically a married couple. SMSFs currently account for approximately 26% of the monies invested in superannuation funds, 2nd to industry funds which hold approximately 32.5%.

When parties separate on a final basis and work through dividing their assets, superannuation is often ignored in these discussions. It is important to ensure that superannuation is included in any Balance Sheet or part of any discussions between separated parties about property settlement.

The division of a SMSFs can appear overly complex due to the nature of assets held by the SMSF. A common purpose for a SMSF for a married couple is to own an investment property. When the couple separates, it is not as easy as transferring superannuation between parties such as in an industry fund by way of a Super-splitting Order or Superannuation Agreement. The couple has a number of options that include:

  1. Both parties remaining in the SMSF and either retaining the same superannuation interest or adjusting their superannuation interests.
  2. One party retaining the SMSF and the parties either retaining the same superannuation interest or adjusting their superannuation interests.
  3. Neither party retaining the SMSF and the parties either retaining the same superannuation interest or adjusting their superannuation interests.

In all options, the investment property held by the SMSF may need to be sold to allow for an adjustment of superannuation interests or to allow the SMSF to be closed.

There may also need to be changes to be made to the Trust Deed or corporate Trustee of the SMSF in circumstances that one of the parties is leaving the SMSF.

In circumstances that the parties intend to adjust their superannuation interests in the SMSF, this needs to be formalised by way of a Super-splitting Order made by the Federal Circuit and Family Court of Australia or a Superannuation Agreement that can be drafted as part of a Financial Agreement pursuant to the Family Law Act 1975.

These documents require the assistance of an experienced family lawyer to ensure that any agreements reached are formalised to ensure any changes to superannuation interests are made in accordance with Superannuation legislation and regulations.

Important documents to collate and provide to your family lawyer about your SMSF include:

  • The Trust Deed
  • The Super Fund Look Up statement
  • The last three years of financial statements
  • The last three member statements

If you have any questions about how your SMSF is impacted by a Family Law separation or you require assistance in your property settlement please contact our Family Law team at Adams & Partners Lawyers and make an appointment.

Written by Steven Ng

Steve

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