As the boom of new Self Managed Super Funds (SMSF) continues, many will face a time when the once seemingly perfect retirement savings vehicle turns out to be a headache. In all likelihood this would arise from any number of complications around remaining compliant with the strict rules that fall on members and trustees. One other instance is when a de-facto or married couple split up. In this situation the newly single members have several few options, depending on their circumstances and nature of the relationship. The next few articles will explore some of these options to highlight what is involved and what to look out for if you find yourself in this situation.
Keeping the SMSF with both members
The default option if nothing else has been decided upon is to do nothing and both remain as members of the super fund. This is a highly unlikely solution, particularly if the relationship has broken down, but the fund will remain compliant.
The downside to common SMSF members who have split from each other but choose to remain in the same fund is that it becomes extremely messy. The ATO still requires you to have trustee meetings with minutes on all decisions and documents to be signed. This is quite difficult if the situation is volatile and all communication has broken down.
Even though all members of the fund are equally responsible and liable in maintaining the fund, it is not uncommon for these duties to be looked after by one of the members. In this scenario, the ‘controlling’ member may not feel comfortable doing this work any longer for their ex-partner. Alternatively, the other member who has (up until that point) relied upon their partner to keep everything up-to-date is often left playing catch up with no understanding of what has been done or what is required going forward. In short, this is a bad option and obviously should be avoided. Relationship breakdowns are horrible experiences to go through on their own without the ATO breathing down your neck.