This article provides guidance on processing a divorce settlement payment, which includes interest splits between members and how to roll out interest.
Details
Note
BGL do not provide accounting or taxation advice. The following is designed to act as a guide for Simple Fund 360 users. It is not designed to be accounting or tax advice and should not be taken as a strict guideline. Other methods that are more suitable may be used instead of these steps.
The division of a fund's assets is a complex issue. Professional financial and legal advice should be sought prior to undertaking any of the actions below.
This article will consider two broad scenarios that could occur in the event of a divorce between two fund members and the ensuing division of fund assets:
- Cash amounts only being transferred out/paid in lump sum to the exiting member
- Non cash assets being transferred to the exiting member at market cost
Before processing the following, ensure to Create Entries to the day prior to the transfer so SF360 correctly calculates the balance in each members' accounts.
Example 1 - Transfer of cash only
A member of a fund may be required to leave the fund as a result of a divorce settlement and take with them their appropriate share of the fund's cash interests as determined by a court.
Often the members' current interests in the fund are different from that determined by the court and therefore will require an adjustment prior to processing the departing member out of the fund.
This will be achieved in a two-step process in Simple Fund 360:
- Process an internal transfer from the appropriate member to reflect the members' interests as determined by the court
- Process a lump sum payment/rollover for the member leaving the fund
A husband and wife are two members of a fund. A court ruling has determined that the interests of the fund should be split 50:50. This is shown below:
| Member | Accumulation Balance (Cash only) | Court determined interests | Internal Transfer required |
| John Jones | $750,000 | $500,000 | ($250,000) |
| Mary Jones | $250,000 | $500,000 | $250,000 |
This will require an internal transfer of $250,000 from the husband to the wife to achieve the interests as determined by the court before the wife is processed out of the fund.
Example 2 - Transfer of cash + Non-cash assets
A more common scenario is where the fund has a combination of cash and non cash assets. A member, either through agreement with the other member or ordered by a court, will transfer a non cash asset to the other member as an in-specie transfer.
This example builds on the previous example and will consider the scenario where the member receiving the asset will not remain in the existing fund and will instead receive the asset in their new fund.
As in the previous example, the current members' interests may not reflect the interests decided by a court which means that an internal transfer will be required to achieve the split in interests determined by court/agreed upon by the members.
Consider a fund with the following member balances where a split of interests of 50:50 is determined:
| Member | Accumulation Balance (Cash + Non-cash assets) | Court determined interests |
| John Jones | $500,000 | $350,000 |
| Mary Jones | $200,000 | $350,000 |
Which owns the following investment property:
| Account | Cost Base | Market Value |
| Investment Property | $200,000 | $300,000 |
It is determined that Mary will receive the Investment Property and that the $50,000 shortfall will be comprised of $20,000 of BHP shares and the rest in cash:
| Mary | Market Value |
| Investment Property | $300,000 |
| BHP Shares | $20,000 |
| Cash | $30,000 |
What to do in Simple Fund 360?
Example 1 - Transfer of cash only
1. Internal Transfer
Process an internal transfer of $250,000 from John Jones' accumulation account to Mary Jones' accumulation account to reflect the members' interests as determined by the court.
This example assumes that both members are in accumulation mode. If members are in pension mode this will require manual journal entries.
| DR | 57100 - Internal Transfers Out/Member |
| CR | 56100 - Internal Transfers In/Member |
2. Process member leaving the fund
Process a rollout via SuperStream or lump-sum payment of $500,000 for Mary Jones leaving the fund.
Regarding interest splits following a divorce, where the receiving member is a non-SMSF member, the ATO has noted that both the SuperStream and paper form methods are acceptable.
Whilst processing the rollover in this case via SuperStream is currently unsupported in Simple Fund 360, users may proceed to use the paper form method in sending the RBS to the APRA recieving fund.
Example 2 - Transfer of non-cash assets
1. Internal Transfer
Process an internal transfer of $150,000 from John Jones to Mary Jones to reflect the members' interests as determined by the court.
| DR | 57100 - Internal Transfers Out/Member |
| CR | 56100 - Internal Transfers In/Member |
2. Untick Asset subject to CGT
If applicable, the asset(s) being transferred will need to have its Asset subject to CGT box unticked. This will prevent any CGT events occurring when the asset is transferred at market price to the departing member. Please see the section Acquiring 'in specie' super assets on the ATO's website for more information regarding CGT exemptions.
This can be done by navigating to the Chart of Accounts and clicking on the asset being acquired.
Click the 
text to expand the account details and untick the Asset subject to CGT box :
3. Process in specie transfer of the asset to the departing member at market value.
The general transaction format that would be posted is:
| DR | Benefits Paid/Transfers Out - Departing Member (46000) | Market value of non-cash asset |
| CR | Non-cash asset | Market value of non-cash asset |
For this example, the investment property and the BHP shares will be in-specie transfer out of the fund.
Mary Jones is the leaving member.
The in-specie transfer transaction will be:
| DR | Benefits Paid/Transfers Out - Mary Jones (46000) | $320,000 |
| CR | Real Estate Properties (77200) | $300,000 |
| CR | BHP Billiton Limited (77600/BHP.AX) | $20,000 |
a. Benefit Payment
Click on the 
button for the benefit payment entry and select the appropriate Type of Payment from the drop-down menu.
As the member is transferring the asset out of the fund, Cashing Out / Benefits Paid has been selected. If the member was transferring the asset to a new fund, you would select the Transferring from one Super Fund to another option.
b. Asset Disposal
Click on the button for each of the asset disposal transactions and ensure that the Disposal Method is set to Manual to allow you to select which parcels (if applicable) the disposal will be sourced from.
Enter the Contract Date details and check that no CGT has been calculated in the Calculations section under each of the Disposal Details screen.
4. Process member leaving the fund
Process a rollout via SuperStream or lump-sum payment of $300,000 for Mary Jones leaving the fund.
Regarding interest splits following a divorce, where the receiving member is a non-SMSF member, the ATO has noted that both the SuperStream and paper form methods are acceptable.
Whilst processing the rollover in this case via SuperStream is currently unsupported in Simple Fund 360, users may proceed to use the paper form method in sending the RBS to the APRA receiving fund.
Additional Information