SMSF entitlements retained in asset splitting decision
A recent Federal Circuit Court case relating to the splitting of assets between a married couple has judged in favour of the wife, thereby retaining her entitlements to a greater portion of the couple’s SMSF.
In making the decision in Northey v Northey handed down on 1 May, Judge McNab decided that the asset pool of Mr and Mrs Northey be divided 57.5 per cent to Mrs Northey and 42.5 per cent to Mr Northey.
In making orders to the effect that the couple should retain their own superannuation entitlements, the court accepted the wife’s submissions that historically she accumulated substantial superannuation savings (approximately $192,171) due to her long-term employment, and that her entitlements rolled over to the couple’s SMSF of which she represented the bulk (approximately 70 per cent) of the joint fund they established early on in the relationship.
The court rejected the husband’s submission that he was solely responsible for most of the growth in the SMSF (approximately $200,000) since its creation based on his selection of the fund’s investment property and carrying out renovations and capital improvements on the property, including planning work, management work and direct labour.
Further, the court held that the husband’s submissions in relation to the SMSF investments were not supported by admissible evidence and noted that the wife also assisted with the renovations to the fund property that resulted in the profitable investment.
It also made orders to allow the wife to keep her entitlements in Australian Super, and that there was no super split to be had as part of the order.
Speaking exclusively to SMSF Adviser, DBA Lawyers senior associate William Fettes said that, in broad terms, the wife was only required to roll out her entitlements in the SMSF to a fund of her choosing and to do all things necessary to enable the husband to retain control of the SMSF as a sole member fund.
“In this regard, the husband was to be liable for all the costs associated with removing the wife from the fund and all ongoing costs associated with the management and compliance of the fund, and the wife was to be indemnified in respect of any costs associated with the fund — past, present or future,” Mr Fettes said.
“This family law decision naturally does not involve consideration of superannuation law compliance or non-arm’s length income.
“But there are certainly questions that could be asked, at least by implication, based on the husband’s submissions that he carried out substantial work for the SMSF presumably with no remuneration.”
Adrian Flores is the deputy editor of SMSF Adviser. Before that, he was the features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.