Assets in an SMSF are regarded to be a part of thematrimonial asset base and also to be a family’s retirement nest egg. However, there are circumstances where it may not go as planned and there is a relationship break down; for example, separation or divorce with your spouse.
As the balance in an SMSF grows it can be a sizable asset to be dealt with, in an event of divorce. Trustees must ensure to make decisions in accordance with the super regulations.
The Trustees need to continue to act in the best interest of all Members even though the Members and Trustees of the Fund may have difficulties with their partner on a personal level.
In addition, the Trustees of the Fund cannot:
In the event of a divorce or a relationship breakdown, there will be legal proceedings through Family Court or there will an out-of-court settlement to determine the division of super. The steps that should be taken are as follows:
The content of this page only contains factual information and does not constitute legal or financial advice. Please ensure to seek legal aid from a family law specialist as they can offer valuable guidance on relationship breakdown and superannuation split.
In a Fund where the initial Trustee structure was set up as Individual Trustees and if there is a relationship breakdown, most likely one of the Trustees may leave the Fund. In this circumstance the remaining Trustee will need to appoint a new Trustee or appoint a Special Purpose Trustee Company. The Trustees must ensure to have all the assets of the SMSF to be registered under the new Trustees. See our Trustee Structure page for more information.
Dissolve the current Fund and roll out the balance to a Retail Superfund or another complying SMSF
In the event of a Divorce the Trustees may decide to wind up the Fund and roll out the super to their respective retail funds according to the settlement or court order.
One Spouse to remain and one to exit
The Trustees of the Fund may decide for one spouse to exit the Fund and one to remain. In this instance the Trustees need to ensure there is enough liquidity in the Fund to pay out the exiting Member. SMSF assets can be rolled over from one spouse to the other. The rollover doesn’t apply if you and your spouse divide the SMSF assets under a private or informal agreement. The rollover applies to CGT events that happen because of either:
Answer: It doesn’t matter whether the divorce is amicable or not, you and your partner will require binding financial agreements or orders, which will involve the assistance of a lawyer to confirm this splitting arrangement of the Member balances.
Answer: Yes. If you don’t get legal advice, the payment splitting agreement won’t be binding on the Trustee of the superannuation fund. To make the payment splitting agreement to be binding, each party is required to obtain independent legal advice and a legal sign-off regarding the Member balance split. This is noted in the page 17 of Super Splitting issued by Attorney-Generel’s Department.
Answer: Although it is advisable to get the family court involved to confirm this splitting arrangement of the Member balances, you can do it yourself. The SIS Act is silent on this issue, but trustees can come to an arrangement. Be mindful this may be open to legal challenge later on if not stamped by the court.
See our Transferring Benefits Out page for more information and to download the rollover form.