Many couples choose to invest in their superannuation via a Self-Managed Superannuation Fund, rather than in the usual types of superannuation funds such as industry funds. Often that is done on the advice of their accountant or financial advisor, either for asset protection purposes, or because it is considered that the type of investments they can include in a Self-Managed Superannuation Fund would better meet their particular goals.
The most common type of Self-Managed Superannuation Fund that we find in Family Law matters, involves only the parties to the marriage or de facto relationship as members of the Fund. You and your spouse must also be trustees of the Fund, or you may have a corporate trustee in the form of a company, of which both of you are directors. Sometimes other family members (such as adult children) are also involved in the Fund.
Even though a Self-Managed Superannuation Fund may allow you more scope and flexibility to invest your superannuation, this type of fund is subject to strict compliance requirements under the law, and failure to adhere to those requirements may have disastrous consequences, particularly if the Australian Taxation Office decides that your particular fund is non-compliant.
It is necessary for a trustee of a Self-Managed Superannuation Fund to prepare Financial Returns of the Fund, have the figures audited, and lodge a Taxation Return on an annual basis. Often, one spouse will have the information to enable the accountant to attend to the necessary matters. Often, the other spouse will not.
If you and your spouse are members of a Self-Managed Superannuation Fund, but have decided to, or have already, separated, it is important that you obtain advice from an experienced Family Lawyer in relation to your rights, responsibilities and entitlements under both the Family Law Act and the superannuation laws and regulations.
For example, did you know that if the main investment held in the Self-Managed Superannuation Fund is a house property (usually rented out), the superannuation rules forbid one of you from moving into the property after you have separated.
On some occasions, one spouse may decide that they need cash urgently, and may be tempted to dip into the bank account that receives the income that the Self-Managed Superannuation Fund earns. That can get you into hot water as well.
On the upside, just as superannuation that is held in an industry fund can be split between you and your spouse under a Family Law order or agreement, so too can superannuation that is held in a Self-Managed Superannuation Fund. The ability to split a superannuation interest may depend, in part, on the nature of the investments that are held in the Fund.
The annual Financial Returns of the Fund will include statements of the value of each member’s interest in the Fund. Most of the time, the value of your member account will be different from the value of your spouse’s member account. This can occur for a number of reasons. For example, one of you may have been directing your employer to deposit your Superannuation Guarantee Payments into your Self-Managed Superannuation Fund, or one of you may have rolled over some superannuation from an industry fund. One of you may be paying more for insurance premiums through the fund.
No matter the balance of your own member account compared with that of your spouse, it is usually possible to adjust those balances by doing a Family Law superannuation split, and roll out an appropriate amount of superannuation into a separate superannuation fund for the spouse who wishes to leave the Self-Managed Superannuation Fund as part of the process of separating your financial relationship.
If the investments within the Self-Managed Superannuation Fund consist of assets other than cash (eg: real estate, shares, investments in unit trusts), there may need to be a sale of some assets, or alternatively, an “in specie” rollover to another Self-Managed Superannuation Fund, in order to achieve the desired result.
There can be taxation and/or stamp duty consequences involved, so it is important to have those issues investigated and taken into account before anything is finalised.
If one of you leaves the Self-Managed Superannuation Fund, it is important to ensure that the Fund remains compliant with the relevant laws and regulations (for example, all members of the Fund must also be trustees or Directors of its trustee company and vice versa); or you may choose to wind up the Fund.
Remember, your Self-Managed Superannuation Fund is just one aspect of your Family Law property settlement. It will need to be considered together with all of the other assets and superannuation of you and your spouse, to determine a just and equitable division overall.