Key takeaways
- Superannuation is treated as property in a family law settlement and can be split.
- Super can be split by agreement or by court order, after the fund is valued.
- An SMSF adds complications, as both spouses are often trustees and assets may be illiquid.
- Get family law and SMSF advice together, as the two interact closely.
Separation is hard enough without the added complexity of an SMSF. Because both spouses are often members and trustees, and because fund assets can be illiquid, an SMSF needs careful handling during a family law settlement. This guide explains the moving parts so you know what to expect.
Super is property
Under family law, superannuation is treated as property that can be divided between separating partners. It is not automatically split equally, and it is considered alongside other assets as part of the overall settlement. The super can be split by a formal agreement between the parties or by a court order.
Valuing the fund
Before super can be split, the fund and its assets must be valued. This is straightforward for cash and shares, but harder for property or unusual assets, which may need an independent valuation. An accurate, current valuation is the foundation of a fair split.
The SMSF complications
- Both spouses as trustees. When a couple separates, they usually do not want to keep making joint decisions. One party typically exits the fund.
- Illiquid assets. If the fund holds a property, splitting a member's entitlement may force a sale or a transfer, with cost and tax to consider.
- Trustee duties continue. Until the fund is sorted out, both trustees must keep acting in members' best financial interests, even while separating.
How a member usually exits
Commonly, the departing member's entitlement is rolled over to another fund or paid where a condition of release is met, and they are removed as a trustee or director. See adding or removing members. Because family law, super and tax all interact, this is an area to handle with a family lawyer and an SMSF specialist working together rather than separately.
Frequently asked questions
- Is superannuation split in a divorce?
- Super is treated as property in a family law settlement and can be split, by agreement or court order. It is not automatically divided equally; it is considered as part of the overall property settlement.
- What happens to our SMSF if we separate?
- Usually one party exits the fund. Their entitlement is rolled over or paid where a condition of release is met, and they are removed as a trustee. If the fund holds illiquid assets like property, a sale or transfer may be needed.
- Do we need to value the SMSF?
- Yes. The fund and its assets must be valued before super can be split. Cash and shares are simple to value, but property or unusual assets may need an independent valuation to ensure a fair split.
