Breaking up is hard to do. Beyond the emotional and financial turmoil divorce creates, there are a number of issues that need to be resolved.
What happens when there is a family company?
For couples that have assets tied up in a company, the tax consequences of any settlements paid from the company will need to be assessed. Settlements paid out by a corporate entity can sometimes be treated as taxable dividends and taxed at the relevant spouse’s marginal tax rate.
If you are receiving assets from a corporate entity as part of a property settlement, it’s essential that you understand the tax implications prior to settlement or a sizeable portion of the settlement could go to the ATO.
For business owners, outside of the tax and financial issues, it’s important to not lose focus on what’s important to keep the business running efficiently.
What happens to your superannuation in a divorce?
A spouse’s interest in superannuation is a marital asset and can be split as part of the breakdown agreement. It’s important to be aware however that superannuation cannot be paid directly to a spouse unless the spouse is eligible to receive superannuation (they have met a condition of release) but it can be rolled over into the spouse’s fund until they are eligible to receive it. Laws exist to prevent taxes such as CGT being triggered when superannuation assets are transferred. This is particularly important where your superannuation fund holds property.
A Court order or Superannuation Agreement is required to give effect to the agreed split in the SMSF assets or to execute a rollover eligible for the CGT rollover concession.
If you have an SMSF and both spouses are members, it’s important to get advice to make sure that all of the appropriate administrative issues are taken care of. Where a divorce is not amicable, it’s important to keep in mind that the SMSF trustee is required under law to act in the best interests of the fund and its beneficiaries. Anything less and the fund members may seek compensation for loss or damage.
Can you protect both parties from divorce?
In a divorce, assets are split based on a multitude of factors such as earning capacity, maintenance of children, and the assets held pre-marriage. Most couples don’t enter into their marriage with a plan for how assets and income should be attributed in the event of divorce. However, the law does allow for married and de facto couples to enter into a Financial Agreement that sets out what happens to their assets should they separate. These agreements can be used to protect inheritance or property and other assets accumulated by the parties prior to the start of their relationship together. A legal advisor can provide advice on these types of agreements.
Divorce and Business: Expert Guidance
Navigating divorce and business concerns can be overwhelming. For personalised advice on managing your business through divorce, contact our experienced team today. We’re here to help you navigate the complexities of divorce and business.
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.