SMSF and Separation

In the process of separation and we've a SMSF in both names as trustee's

The SMSF is predominantly shares and we will likely both go to industry super funds ie Hostplus, SunSuper, Australian Super

That means CGT payable , not sure how to work out how much as we won't know until we sell and both still in acquisition phase

One person could keep the SMSF and add in a Corp trustee but that would be another layer of expenses on a vastly reduced balance

Hoping that some members here may have some thought's, tips, or other considerations to look at as we try to sort this process out

 

Is the split 50/50?

 

I'll defer to those in the know here but I thought no CGT payable (only deferred) with a court order (i.e. Separation)?

From what I've read, inspeccie XFER not an option with industry funds as you're generally buying into the pool?

Does this then mean that you have to sell, so basically force a CGT event?

@Terry_w , @Paul@PFI , @Redwood?

SMSFs: CGT & superannuation transfers on marriage breakdown

https://www.firstlinks.com.au/impact-marriage-breakdown-smsf

Don’t spoil the split

If amicable I've also read about a Superannuation Splitting Agreement

 

Its a complex area and legal advice is needed. There may be CGT rollovers but this can leave the transferree an asset pregnant with CGT so the potential liability needs to be factored in, even if not triggered.

 

Both member / trustees need to decide on the process and rollovers. When its a liquid investment its often easier to wind it up and rollover both members to their choice of industry fund. Note that timing is everything so the 2021 AND 2022 years should all be finalised so member baances can be recalculated to present values so allowance can be made for taxes and other costs. We do a few windup a yera and it just needs to be organised but isnt itself complex. CGT is a minor "cost" as its 10% - 15% and often less. Since member balances are based on continued revaluation iot doesnt really eat into balances much.

The decision to keep a smsf for one member is a financial product choice and ideally requires financial advice. Cost / benefit is the usual issue.

Winding up a smsf early in the process can simplify family law asset division issues. However for large balance members I would strongly encourage early legal advice as martial split rules can be a benefit (eg one party may take some of the others super as part of the division of property!!) . Not for smaller balances. These sorts of agreements MUST be a element of court orders to ber lawful. You cant both agree privately as that is unlawful release of super.

 

Talk to your family lawyer about the costs of a marital order for the cgt exemption. I have gone down that path a few times and getting both parties to agree to it is very difficult. I have had people agree to it until the last minute and then disagree as they are about to sign.

Your family lawyer doing the divorce should run this process.

 

To be fair I know a lot of family lawyers are garbage at complex financial structures (which I'm including an SMSF in that category).

I suspect it might need a bit of teamwork or a lawyer with that level of financial savvy.

 

I know a few that are pretty good. But yes some are useless - like any profession really.

 

I had a client meeting where one smsf Director refused to sign to resign until the other transferred property. The other refused to transfer the property until the other resigned as Director and it was a classic chicken or egg stand off. They were in neighbouring offices and both were stubborn. Lawyers and accountants for each also in attendance. (Property value was approx $12m at time and was beachfront Byron Bay) After SIX hours the solution was found where each parties accountant was to receive BOTH sets of executed records and when we were both happy we would copy them so each knew the other had consented etc and then we instructed the lawyers for each to approve the execution of the matters and then attended to the relevant acts... And then when all that was completed all parties...clients and lawyers and accountants would be simultaneously told the transfer had occurred. THe solution itself took 15mins. The stand off was 5 hrs 45 mins. Meanwhile all advisers were billing by the hour.....

Many stand offs happen with soliictors (due to adversarial nature?) and sometimes accountants can be more trusted.

 

Yep, absolutely clueless on average, I doubt they can even decipher financials and read bank statements for money flows.