A lawyer has advised SMSF trustees to consider implementing a sequencing schedule for splitting member benefits to avoid negative outcomes where funds are rolled over using SuperStream.
DBA Lawyers senior associate William Fettes said while SuperStream was applicable in many cases, it may not be the only way to transfer assets into another SMSF following the departure of a trustee.
“In essence, the SuperStream rules will cover a rollover of member benefit entitlements, including member entitlements that are post-split entitlements, [but] it will not cover a transfer of a split amount,” Fettes said.
“If your split amount is being directly transferred, it is not actually considered a rollover for the purposes of the SuperStream rules, so this really depends on how the splitting orders are structured and there are planning opportunities available to not have work within SuperStream.”
He noted an example of a split with the intention of equalising superannuation between two trustees, where the departing trustee, Lucy, would have a 100 per cent interest split, and the remaining trustee, Roger, has a 50 per cent interest split.
The purpose of the 100 per cent interest split was to “clear the deck” so the 50 per cent split could be made without having to calculate for a base amount and, in effect, created two new interests in the fund, he said.
“It enables you to get that 50 per cent position without calculating some formula for a base amount,” he said.
“The sequencing here has meant that in order for Lucy to leave the fund, it has to be a rollover of her post-split entitlements that is within SuperStream.”
He said the split would also be partly within SuperStream if the base amount split to Lucy was based on the differential between the two members and then transferred to her new nominated fund.
In this instance, however, Lucy would still retain her remaining entitlements because the transferred amounts were based on the differential, but the entitlements were not split and would have to be transferred by SuperStream.
“Essentially the rollovers of member entitlements are going to happen within SuperStream, while transfers that are direct transfers of the split will not,” he said.
He said based on this the original split could have taken place completely outside SuperStream.
“We would be outside of SuperStream with a 100 per cent interest split to Roger, then a 50 per cent interest split to Lucy, which was documented as a transfer of transferable benefits to the new fund,” he said.
“You can just see here this idea of getting it right because even a very switched-on family law expert may not be fully cognisant of the SuperStream rules.
“It is good to be aware of these things because you can potentially design the splitting orders with more optimal outcomes for things like this.”
