It’s always hard to break up. Divorce is not just about the financial and emotional turmoil. There are many other issues to resolve.

What happens when a company is owned by a family?

Couples with assets in a business will have to assess the tax implications of any settlements that are paid by the company. Sometimes, settlements paid by business entities can be taxed as dividends at the marginal rate of each spouse.

You must understand the tax implications of receiving assets as part of an asset settlement from a business. Otherwise, a large portion of your settlement may be paid to the ATO.

It’s vital that business owners focus on the important things to ensure the business runs smoothly, and not just the tax and financial aspects.

What happens to superannuation when you divorce?

The superannuation of a spouse is considered a marital asset that can be divided as part of a divorce agreement. Superannuation can’t be paid to a spouse directly unless they’re eligible (they’ve met a condition for release). However, it can be transferred into their fund until the spouse becomes eligible. There are laws that prevent taxes like CGT from being triggered by the transfer of superannuation funds. It is especially important if your superannuation funds hold property.

It’s crucial to seek advice if both spouses have SMSFs and are members. This will ensure that the administrative aspects are handled properly. If a divorce does not end amicably, the SMSF trustee must act in the best interest of the fund and beneficiaries. If the trustee does not act in the best interests of both parties, fund members can seek compensation.

Can you protect the two parties from divorce?

Assets are divided in a divorce based on many factors, including earning capacity, the maintenance of children and assets owned before marriage. Most couples do not have an equal understanding of the distribution of assets and income during their marriage until there is a problem. 

There are many benefits for the household if there is an income disparity. Superannuation is taxed at a lower rate than your own income, so if you partner earns less money than you do, it’s a good idea to top up their super. Taxable income is no different. Spreading the tax burden is easier if you can equalize the income that comes into your household. Planning can make a big difference.

If you have any questions related to superannuation, SMSF or tax matters related to divorce or separation, please contact our tax experts at Bates Cosgrave.