Dealing with self-managed superannuation fund (SMSF) matters during a separation can be complex, so having a good grasp of the fundamental issues and documents can help reach the best outcome.

Make sure you know where all the documents are – and have a copyFundamentals of SMSF

Anyone that has established or administered an SMSF knows the amount of paperwork they generate, but some of it is very important to keep track of during a separation.

The SMSF Deed is the book of rules that determines what an SMSF can and can’t do, and trustees should make sure they know where both the original and any upgrades are, and have a copy. Having just the most recent deed isn’t really enough – if these are not executed properly the update will not be valid, and the SMSF will need to revert back to the earlier deeds.

Try to keep to reporting obligations

SMSFs are heavily regulated, and the ATO takes a keen interest when tax returns and other lodgements for SMSFs are late – assuming that late means a breach of the rules.

While they can always be reasonable to arrange extensions with, keeping reporting up to date can minimise the risk of extra ATO attention and potential trustee penalties. In addition, most of what an SMSF is reporting on is what has happened in the past, so as long as the SMSF financials can be reviewed by an independent party in any areas of contention, the trustee should be comfortable to keep things moving.

Remember the Dos and Don’ts

The ability for trustees to invest in their own retirement savings comes with a long list of prohibitions.

It can sometimes be tempting for the trustee with access to the SMSF bank account to borrow money when cash flow is tight or to not pay the rent due on the SMSF-owned property from the business. Trustee penalties for breaches of the rules can be significant and may be issued to the innocent party as well.

Fundamentals of an SMSF

Make sure the information is current

The historical nature of SMSF reporting means that often member balances aren’t provided until almost 12 months after year-end.

Add in any delays, or complications in valuing assets and discussions in relation to SMSF splitting can be based on information that just isn’t accurate. The level of technology and automated data available for SMSFs means there is often no excuse for not being able to make sure that the member balances are closer to current.

Understand who has access to cash

The ability to access money from superannuation via either a full pension or a transition to retirement pension may mean that one or both members are able to access money from superannuation. Drawing a pension requires that a minimum percentage is withdrawn each year, so making sure the trustees meet their obligations while negotiating is vital. 

How can RSM help you?

If you have any questions regarding SMSF during separation, get in touch with a local adviser today.