Going through a divorce is tough, and it’s not just the emotional and financial strain you need to think about. Plenty of issues need sorting out, especially if you’re running a business.
What Happens When There’s a Family Company?
Suppose you and your partner have assets tied up in a family company. In that case, it’s essential to consider the tax implications of any settlements that might be paid out from the business. Sometimes, these settlements can be treated as taxable dividends, which means they’ll be taxed at the receiving spouse’s marginal tax rate.
If you’re set to receive assets from a company as part of the property settlement, understanding the tax impact before everything is finalised is essential. Without this knowledge, you might find that a significant chunk of your settlement goes straight to the ATO.
It’s easy for business owners to get caught up in financial and tax issues, but it’s vital to keep your eye on the ball and ensure your business continues to run smoothly.
What Happens to Your Superannuation in a Divorce?
Superannuation is considered a marital asset and can be split as part of your divorce agreement. However, it’s important to note that your super can’t be paid directly to your spouse unless they’re eligible to receive it (meaning they’ve met a condition of release). Instead, it can be rolled over into your spouse’s super fund until they’re eligible.
Laws are in place to prevent taxes like Capital Gains Tax (CGT) from being triggered when super assets are transferred, which is particularly important if your super fund holds property.
A Court order or Superannuation Agreement is required to split SMSF assets or rollover funds while benefiting from the CGT rollover concession. If you and your spouse are members of an SMSF, getting professional advice is essential to ensure all the administrative boxes are ticked.
If the divorce isn’t amicable, remember that the SMSF trustee is legally bound to act in the fund’s and its beneficiaries’ best interests. Anything less, and the other fund members may seek compensation for any loss or damage.
Can You Protect Both Parties During a Divorce?
When assets are divided during a divorce, the split is based on various factors like earning capacity, child maintenance, and assets owned before marriage. Often, couples don’t consider how income and assets should be shared until the relationship breaks down.
If there’s a significant difference in income between you and your spouse, there can be real financial advantages to balancing how income flows into your household. For example, if your partner earns less, topping up their super could be beneficial, as superannuation has favourable tax rates. The same goes for taxable income – spreading it evenly can help reduce the overall tax burden. A little planning can go a long way.
If you’re navigating a divorce and are concerned about your business or superannuation, reach out for professional advice. We’re here to help you make informed decisions during this challenging time.