Running an SMSF under regular circumstances comes with enough compliance obligations as it is. Adding divorce or separation into the equation can raise even more legal and tax issues that need to be addressed.

The breakdown of your relationship does not absolve you from your responsibilities as an SMSF trustee; you are still expected to continue acting in accordance with super laws and in the interests of all members. As a trustee, you must:

• Include another trustee in the decision-making process, and
• Acknowledge requests to redeem assets and rollover benefits to another super fund.

When it comes to dividing SMSF assets, separating couples can transfer assets, such as property, from one SMSF fund into another. During this process it is important to consider:

• How they will decide to split their superannuation fund. They can choose to enter into a formal written agreement, seek consent orders, or if the separating couple cannot reach an agreement, they can seek a court order.
• Whether they have the necessary documentation readily available, as it is essential in the event of an ATO audit. Due to there being beneficial tax consequences in splitting a superannuation fund, it is essential that the documentation, such as the notice for splitting the super, shows a genuine separation.
• Where the new fund is to be a single member fund, it is advisable to incorporate a special purpose company to be the trustee. This avoids having a second person as a trustee.

Each year you are entitled to a tax deduction for a certain amount of superannuation contributions. The tax deduction is available to your employer if they contribute on your behalf but it can also be available to you personally when you make extra contributions to super.

The amount that you can claim as a tax deduction is limited to what is known as your Concessional Contributions Cap.  There is a standard Cap of $25,000, though that is increasing to $27,500 on 1st July 2021. There are certain people that can add amounts that haven’t been used in previous years to this cap amount.
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If you go over your Concessional Contributions Cap, the excess contributions are merely added to your taxable income so you don’t get any tax benefits out of the contribution.

For example, let’s say your Concessional Contributions Cap is $25,000 but you make $35,000 in concessional contributions.  The extra $10,000 will be added to your taxable income but you will receive a credit for the $1,500 in contributions tax paid by the super fund.

But there is a little known trick to allow you to “bring forward” a tax deduction for your concessional contributions.  This “hack” is commonly known as a Contributions Reserving Strategy and it has been approved by the Tax Office.  If done correctly it allows you to take some of next year’s Concessional Contributions Cap and bring it into this financial year.  But it must be done correctly and if you take advantage of it, you need to lodge a specific form with the Tax Office to let them know. The ATO will almost certainly audit what you have done.

It is also important to note that it is really only achievable to do this strategy with a Self Managed Superannuation Fund.  It is also important to note that you are merely bringing forward your contribution (using it this year) and that you won’t be able to use that amount next year, so careful planning is also needed.
This type of strategy is used by people who will have an unusually higher taxable income this year than they will next year.  So, for example, you might have a large capital gain this year or you might be retiring and have no taxable income next year.

Leaving it until the new financial year to discuss this strategy is far too late, and it absolutely cannot be done after late June. It is essential that you talk to us if you feel next year’s taxable income will be a lot lower than this year

The superannuation gender gap has been a subject of serious concern for at least half of Australia’s population.

Women are more likely to have significantly less money saved for their retirement, less assets and far less super than men, putting them in a place of greater financial stress and concern.

For example, a woman in the 20-24 age bracket may have an average super balance of $8,051, while a man in the same bracket is expected to have an average balance of $9,481. In the 40-44 age bracket, the average super balance for men is $134,992, while women in that age group may only possess $98,572.

The superannuation gap is facilitated by various factors that often adversely affect women more than men.

Men and women may have different super balances due to pay gaps, salary differences and potentially the amount of time they have spent working (maternity leave, working part-time versus full-time etc., taking time off work for travel, etc.).

Some key contributing factors include:

Pay Disparity (The Wage Gap)

In Australia, the gender pay gap is 22.8%.-  for every $10 earned by a man, a woman (on average) will only earn $7.72.

Caregiving

Time taken out of the workforce for the purpose of caregiving is predominantly done by female employees. Females account for more than 70% of primary caregiving, on average, taking five years out the workforce. Their caregiving responsibilities may range from childcare to looking after ill or elderly family members.

Part-time Workers

Women are more likely to work part-time or casually than men, contributed to by a lack of workplace flexibility to accommodate care responsibilities. This not only affects the amount women earn, but career and wage progression.

Compound Interest Effects

Compound interest makes super a powerful tool when saving for retirement as interest is paid on both the principal and interest from past years: a bit like the snowball effect – over time you see exponential growth.

A lifetime of earning widens the gap, and compounding interest deepens this divide. Males are earning compound interest on their more considerable savings, which means more interest in the long term.

There are three proposed measures concerning how the superannuation gap could be addressed at a macro level. These include:

• Including superannuation guarantee contributions in the Commonwealth Paid Parental Leave scheme, as a majority of recipients are women, and it is a leading cause of the gap exacerbation.
• Allowing unused concessional contributions to be made for recipients of Commonwealth Paid Parental Leave without time limits is harming women’s superannuation outcomes, so the policy needs to be changed accordingly.
• Amending the Sex Discrimination Act to ensure employers can make higher superannuation payments for their female employees if they wish to do so without contravening the existing legislation.

Here are some examples of ways in which women can increase their super balances to make up for any losses that may have been incurred until legislative action is taken to amend this discrepancy:

• Contribution splitting – by having their spouse transfer some of their superannuation contributions over to their account, their account can be increased.
• Salary-sacrificing contributions into their super to make up for the shortfall from not working in the previous year.

If you are concerned about your superannuation or would like further advice, please speak with us.

Gender gaps can affect superannuation accounts as much as they can affect salary rates. With barriers to entering into fields, lower hourly rates of pay, less hours worked and more unpaid labour affecting the amount of super Australian women are retiring with, as compared to men.

Currently, the median superannuation balance for men aged between 60-64 stands at $204,107 whereas the superannuation balance for women of the same age has a median total of $146,900. It’s a gender superannuation gap of 28%.

This gender gap in superannuation balances can be impacted even more by women using maternity leave. With women taking their time off from work and losing out on super contributions during this period of paid parental leave, it can affect their super in the long run as it exacerbates the income and superannuation gaps that were already in effect during their employment.

It can also be exacerbated by existing salary gaps across the workforce. Despite traditionally male-dominated fields experiencing high percentages of female graduates entering into the workforce, the positions that they fill are not always high-ranked, irrespective of experience.

There are threeproposed measures with regard to how the superannuation gap could be addressed at a macro level. These include:

• Including superannuation guarantee contributions in the Commonwealth Paid Parental Leave scheme, as a majority of recipients are women and it is a leading cause of the gap exacerbation.
• allowing unused concessional contributions to be made for recipients of Commonwealth Paid Parental Leave without time limits is having a negative impact on women’s superannuation outcomes, so the policy needs to be changed accordingly.
• Amending the Sex Discrimination Act to ensure employers are able to make higher superannuation payments for their female employees if they wish to do so without contravening the existing legislation.

Here are some examples of ways in which women can increase their super balances to make up for any losses that may have been incurred:

• Contribution splitting – by having their spouse transfer some of their superannuation contributions over to their account, their account can be increased.
• Salary-sacrificing contributions into their super to make up for the shortfall from not working in previous year.

If you are concerned about your superannuation, or would like further advice, please speak with us.