SMSF members splitting benefits can use the preservation status of the member spouse to provide ready access to their partner, offering planning opportunities under certain circumstances, according to an SMSF lawyer.
DBA Lawyers senior associate William Fettes said the preservation aspects of split member benefits are carried over from the member spouse who remains in the fund to the non-member spouse who is leaving the fund.
“In terms of how the splitting rules operate for preservation components, essentially it samples the member spouse’s interests and whatever the non-member spouse is getting in the way of a split amount is based on the same preservation characteristics as the member spouse’s interest,” Fettes said during a recent webinar.
“That sampling applies regardless of whether it’s an internal allocation to a new interest, a transfer or a lump sum.”
He said this was particularly useful where a member had unrestricted non-preserved benefits (UNPB), which would be applied to the non-member spouse after a split.
In an example, he cited a couple who share an SMSF but are divorcing, where the husband, Jim, held UNPBs but the wife, Rachel, held preserved benefits.
“In this case, the parties are getting a consent order in place and Jim’s pension is going to be commuted to enable a split of $250,000 to be applied to Rachel and therefore that is all UNPB and Rachel then gets those UNPBs,” he said.
“This means they can be freely cashed out as UNPBs are not subject to a cashing restriction and that enables Rachel to have access to benefits even though she’s not actually met a condition of release with her own benefits.
“That is something that you can plan for and the other parties might place a value on having super that they can have access to in the event that they need it.”
