For couples with investments tied to a business, it's crucial to consider the tax consequences of any distributions made by that business. Payments issued by a company might sometimes be regarded as taxable dividends, subject to the recipient spouse's marginal tax rate.
If you receive assets from a business entity as part of a property division, it's vital to comprehend the tax implications beforehand; otherwise, a portion of the settlement might end up with the ATO.
What happens to your superannuation during a divorce? A spouse's superannuation is considered a marital asset and can be divided in a divorce settlement. Although superannuation cannot be directly paid to a spouse unless they meet the conditions for release, it can be transferred into their super fund. Legal provisions prevent the triggering of CGT during such transfers, particularly when the superannuation fund holds property.
To finalise the division or perform a CGT rollover, a Court order or Superannuation agreement is necessary. It is essential to obtain proper advice to handle the administrative complexities for an SMSF when both spouses are members. In contentious divorces, the SMSF trustee must prioritize the fund's best interests, or affected members may seek compensation.
How can both parties be protected in a divorce? In a divorce, asset division takes into account several factors, including child support obligations, earning potential, and assets acquired before the marriage. Often, couples are unaware of how assets and income should be split until issues arise. When there is a disparity in income between spouses, equalising income can benefit the household overall. For instance, if your spouse earns less than you, contributing to their superannuation can be advantageous due to favourable tax rates. Similarly, balancing taxable income between partners can help distribute the tax burden more equitably. Strategic financial planning can greatly influence the outcome.
If you would like to know more about this or any other issue affecting personal or business taxation, please get in touch with one of our experts now.
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