Nina Kazmierczak- Partner and Principal Adviser
Sovereign Wealth Partners
There are a few ways you can contribute to superannuation and one method which may not be as widely explored, especially by couples, is that of contribution splitting.
The contribution splitting rules allow you to split certain concessional contributions with your spouse to help balance the amounts of super in each of your names or help a lower income spouse build their balance.
Why consider contribution splitting?
- help balance out superannuation account/ member balances
- could help the spouse optimise the individual superannuation balance limits; and
- increase the amount of money that can be held tax free at retirement.
Who can you split to?
Married couples, de facto partners and same sex couples who live together, may qualify to split superannuation contributions. They can be split with a spouse who is:
- under preservation age, regardless of whether they are working or not, or
- over preservation age and under age 65 and has not permanently retired from the workforce. Contributions cannot be split with a spouse who is age 65 or over.
What can be split?
Spouse contribution splitting involves transferring a concessional contribution, this could be (and the list is not exhaustive):
- SG employer contributions (and any additional employer contributions);
- Salary sacrifice contributions;
- Personal contributions that you are claiming as a tax deduction
The maximum amount of contributions a member can split with their spouse in any financial year is the lesser of:
- 85% of their concessional contributions for that financial year, and
- the concessional contributions cap for that financial year (applicable to public sector super schemes).
If you would like to claim a tax deduction in respect of the personal deductible contribution to be split to your spouse, you must lodge a notice of intent to claim a tax deduction with your super fund prior to submitting the spouse contribution splitting application in the financial year immediately after the one where the contributions were made.
How is the split treated?
The amount transferred does not count towards the receiving spouse’s concessional or non-concessional limits. This means that the receiving spouse can also make concessional contributions up to $25,000 and non-concessional contributions (dependant on their total superannuation balance being less than $1.6M).
What’s the catch?
Firstly, the contributor’s balance will fall by the amount transferred as part of the split.
And, if either spouse is on Age pension or social security benefits (other than Commonwealth Seniors Healthcare cards) this strategy is generally not advisable.
Should you wish to discuss this strategy and how it may benefit you and your spouse, please call Sovereign on (02) 8216 1777.