There are both legal and tax implications to be considered when former partners in a SMSF decide to split after the breakdown of the relationship.
It is possible to transfer assets, such as property, from one super fund into another; however, there are four things individuals need to consider:
– Separating couples need to work out how they will go about splitting their superannuation fund. They can choose to enter into a formal written agreement, seek consent orders, or if the separating couple cannot reach an agreement, they can seek a court order.
– It is important to have the necessary documentation as they are essential in the event of an ATO audit. Due to there being beneficial tax consequences in splitting a superannuation fund, it is essential that the documentation, such as the notice for splitting the super, show a genuine separation.
– If the super fund has property as the major form of investment there is the potential that it may create a liquidity problem; however, this can be addressed with future contributions. Individuals will also need to aware of the market valuation rules for real estate in DIY funds.
– If the new fund is to be a single member fund it is advisable to incorporate a special purpose company to be the trustee. This avoids having a second person as a trustee.