New legislation will help prevent superannuation assets from being concealed during divorce proceedings.
From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual’s superannuation information to the Family Law Court.
The recently enacted laws are designed to ensure that there is fairness in divorce proceedings and to prevent the under-reporting of super assets. Further, it is often expensive and time consuming to obtain information through a summons or court orders, if information is not provided willingly.
From April 2022, if a couple enters into divorce proceedings, if one of the parties believes the other is not being honest about the value of assets held in superannuation, they can apply to a family law court registry to request their former partner’s superannuation information from the ATO. They will then be able to seek up to date information from their former partner’s superannuation fund.
What happens to superannuation in a divorce?
In a divorce, superannuation is treated like any other asset. Depending on how the total assets of the couple are split, the superannuation balance of each individual may remain intact with each party taking their respective entitlement from the asset pool or split between the couple.
Property Settlement and Self-Managed Super Funds (SMSF)
For self-managed superannuation funds, generally a SMSF cannot acquire assets such as residential property from a related party. However, there is an exemption when the acquisition is a result of a divorce. Where a residential rental property is involved, the superannuation rules allow a rollover under a court order or financial agreement, rather than forcing the former couple to sell the property. For example, where a couple have a self-managed super fund together, it is common for one member to step down when they divorce. This same member might then set up their own SMSF and utilise the exemption to receive the residential rental property as a rollover.
Capital Gains Tax
Capital gains tax relief is also available where property is transferred to a spouse’s superannuation fund because of divorce proceedings. This means that any potential capital gains tax does not apply on transfer. Instead, the spouse or former spouse who receives the asset will effectively ‘inherit’ the transferor’s cost base of the asset for Capital Gains Tax purposes. That is, when the property is transferred, the tax consequences are generally the same as if the receiving spouse or their superannuation fund owned the property from the time it was acquired.
It is important to seek advice to ensure your superannuation is managed in a way that delivers the best possible outcome. Contact our team on T: (07) 5451 1118 for support with your Super & SMSF arrangements.
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