For couples with assets invested in a company, it’s important to evaluate the tax implications of any settlements made by the company. Payments made by a corporate entity may sometimes be classified as taxable dividends and taxed at the marginal tax rate of the recipient spouse.
If you receive assets from a corporate entity as a part of a property settlement, then you must understand the tax implications before settlement or a part of the settlement could go to the ATO.
What happens to your superannuation in a divorce?
A spouse’s interest in super is a marital asset and can be divided in a divorce agreement. While superannuation can’t be paid directly to a spouse unless they meet release conditions, it can be rolled over into their fund. Laws prevent CGT from being triggered during transfers, especially with property in the fund.
To finalise the split or execute a CGT rollover, a Court order or Superannuation agreement is required. Proper advice is essential to manage administrative issues for an SMSF with both spouses as members. In contentious divorces, the SMSF trustee must act in the fund’s best interests, or members may seek compensation.
Can you protect both parties from divorce?
In a divorce, asset division considers various factors, including child support obligations, earning capacity, and assets acquired before marriage. Most often, couples don’t fully understand how assets and income should be divided until issues arise. When there is a difference in income levels between spouses, equalising income can benefit the household overall. For example, if your spouse earns less than you, contributing to their superannuation can be beneficial due to favourable tax rates. Similarly, balancing taxable income between partners can help distribute the tax burden more evenly. Effective financial planning can significantly impact the outcome.
More Useful Links:
When is a Gift not a Gift?
The Changes to How Tax Practitioners Work with Clients?