Superannuation contribution splitting allows you to transfer some of your personal super contributions to your spouse’s account.
Splitting your superannuation contributions with your spouse is a great way to make sure you are both getting the most out of your retirement as a couple.
This can allow you to top up your partner’s superannuation if they have a lower balance, maximising your tax benefits and providing more flexibility.
How does super contribution splitting work?
A superannuation splitting strategy can allow married couples, de facto partners and same sex couples to split super contributions. They can be split with a spouse who is:
- under the preservation age; or
- over the preservation age, but under 65 and is still working.
Couples can split up to 85% of their employer concessional contributions and any personal or salary sacrifice super contributions up to the contributions cap for that financial year.
The benefits of super contribution splitting
Current legislation prevents couples from sharing access to their super account, unless they operate a self-managed super fund. Super contribution splitting gives couples the ability to distribute super benefits between themselves. The advantages of super contribution splitting can include:
- Increasing your spouse’s superannuation balance – This is helpful if your spouse has a lower than ideal balance through non-working periods or due to a lower income. This can be especially important for women who take time off to raise a family.
- Providing earlier access to super benefits – Splitting your super with a spouse that is older than you and closer to retirement may allow you to access this money earlier.
- Accessing an age pension – When a spouse reaches pension age, which is currently 66, your superannuation balance will become a tax assessable asset. If in this case the older spouse’s assessable assets are below the pension asset test limits, they could potentially be eligible to access an aged pension payment. Assuming an older spouse meets all the rules, there could be a significant benefit in splitting their contributions to their younger spouse, allowing the older spouse to then qualify for a government pension.
- Superannuation catch up rules – Splitting contributions to keep individual balances below $500,000 means each partner can take advantage of the carry forward rules on their before-tax contributions for up to five years. This can allow you to maximise the amount you can add to your super savings for a tax-effective retirement.
- $1.6 million pension cap – Contribution splitting to a spouse could be used as a long-term strategy to even out the super balances between partners and keep individual balances below the $1.6 million super cap. This could help maximise the combined total of super savings that can be transferred to a tax-free environment when you retire.
Plutus Financial Guidance are experts, offering independent advice across a range of financial services including superannuation advice. We are here to help you understand all of the options and tactics available to you, allowing you to make informed choices when it comes to planning for your retirement.
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