SMSF Financial Settlements
Simple Self-Managed Super Fund Financial Settlements with Div-ide
We specialise in helping SMSF Trustees and members navigate the complexities of separating these assets. Superannuation can make up a significant portion of the assets that need to be split during the separation process. Contact us to discuss the best approach for your situation.
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At Div-ide, we have the expertise to help you break through the complex and technical aspects of both superannuation and taxation law, communicating with you both in language that you can understand and achieving tax-effective outcomes.
We keep it simple:
Self-managed superannuation funds add another level of complexity to the financial separation process and require expertise that only financial specialists can offer. SMSFs often hold assets that can be difficult to value or sell, adding to the challenges of property settlements. Furthermore, some assets may be vital for the operation of one party’s business.
This is an important factor that needs to be considered in any proposed split. It is also a financial matter rather than a legal matter. This means that choosing the right superannuation specialist to help you meet your respective goals in a cost effective way is critical.
Agreement & planning
We review the financials for your SMSF, to understand the assets and liabilities that make up your fund. The type of assets and liabilities held will determine if your SMSF can be split in its current form, or assets need to be sold.. We will also look at the cost vs benefit of the various split options available, considering each of your interest and skills in continuing to manage your SMSF. Often one member of a couple enjoys managing their SMSF and its underlying investments, and the other member just signs the required paperwork at the end of each financial year. In a common scenario like this, we would assist the couple to understand the options for one person retaining their SMSF and the other member rolling their SMSF member balance into a Retail fund. This would be considered in conjunction with the total assets and liabilities the couple have to split, so if it makes more financial sense to keep the SMSF investments in tact, one party may retain all the investments in the SMSF and the other party may get more of the assets outside of super, to achieve an overall fair balance in their split. As part of this process we can advise the party getting less super of the contributions they are able to make to their super, and the tax advantages of such contributions. It may be necessary to update beneficiary nominations, trustee arrangements, and other administrative details to align with the post-separation preferences and arrangements.
SMSF valuation
Once both parties’ preferences for maintaining a SMSF are understood, valuations of certain SMSF assets may need to be undertaken. The value of certain assets can be determined without incurring any costs: cash, publicly listed shares and managed funds, whereas other assets will need to be professionally valued, for example: real estate and unlisted investments holding property. Div-ide will work with you, to obtain the professional valuations required, so a total value of the SMSF and each of your current member balances can be determined. Once each of your member balances have been calculated, they can be included in your asset and liability pool and then decisions can be made about how best to treat each of the member balances in the overall property settlement. How each of the parties’ superannuation balances are to be treated, will be detailed in the Consent Orders or Binding Financial Agreement.
Implementation of division
If a member’s superannuation balance is to be split in a property settlement, the Trustee of the relevant superannuation fund (including SMSFs) must do certain things. The Trustee of the superannuation fund must be given notice of a proposed superannuation splitting order before it can be made, whether by agreement or by an order of by the Court, and also confirm the valuation of the member’s interest to be split.
Once an agreement or court order is in place regarding the division of SMSF assets, necessary steps can be taken to implement the division.
This may involve transferring a portion of the SMSF assets to your former partner’s superannuation account, creating a new superannuation account in a retail fund or a new SMSF, or other agreed-upon arrangements.
Div-ide will work with both of you and your accountants to ensure that all legal and administrative requirements are met during the implementation process.
You’re done!
Scenarios
Scenario 1: keep SMSF
A husband and wife have a SMSF which holds: cash, shares and managed funds. The wife enjoys researching investment opportunities and managing the shareholdings in the fund. The husband has been very happy for his wife to manage their SMSF, but now that they are separated, he has no interest in taking on this role going forwards as he would rather work on his boat in his spare time. Div-ide works with the couple and their accountant in order for sufficient holdings to be sold, so the cash balance in the fund is greater than the husband’s member balance. Consent orders are drawn up professionally to formalise this agreement, so the husband’s member balance can be rolled into a retail fund and a corporate trustee can be appointed so the wife can retain the SMSF as a sole member.
Scenario 2: SMSF owns property
A separating couple holds a SMSF which owns the commercial property from which the husband runs his business. The husband’s business rents its premises from the parties SMSF for market rent. However, as the SMSF also has a mortgage over the property, there is not enough cash or liquidity in the SMSF to roll out the wife’s member balance into a retail fund. The husband and wife don’t know what to do, since the husband needs the property in the SMSF for his business, but the SMSF does not have enough liquidity to roll out the wife’s balance and they understand they cannot both remain in the same SMSF post separation. They engage Divi-ide to help them work out a solution. Div-ide arranges for consent orders to be professionally prepared which state that the wife transfers her share in their SMSF to her husband and the husband keeps the SMSF. The consent orders also state that other jointly owned assets outside super are transferred to the wife, to achieve a fair split overall. Div-ide work with the wife to show her the amounts she is able to contribute into superannuation, in a tax effective manner, so she can get her superannuation balance up to a level she is comfortable with.
Scenario 3: SMSF dissolution
Both former partners opt to dissolve the SMSF entirely. Div-ide works with both parties to outline what they need to do to achieve this joint decision. Div-ide, as chartered accountants who specialise in SMSF’s, will outline a detailed action plan specific for your situation, based on whether assets are to be sold and member balances rolled out as cash or whether in specie asset transfers are preferable. Divi-ide will advise on the tax implications of each option, which will vary based on the age of the parties, so both parties can make the best decision for their circumstances.,
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