Splitting contributions may enable you to build your super with your spouse and reduce your tax. Super contributions splitting generally allows you to split up to 85% of your employer super contributions and personal deductible contributions with your spouse.
What’s in it for me?
Boost the super balance of your spouse and grow your retirement savings as a couple
Earlier access to super benefits and tax concessions if your spouse is older than you
Funding insurance through super for your spouse
Optimise super benefits by utilising two low rate caps for lump sum taxable withdrawals between preservation age and age 60
Who can this strategy work for?
Contributions splitting may be suitable if you:
Pay a higher marginal tax rate than your spouse, and wish to fund insurance cover for your spouse through super
Have a spouse eligible to receive super contributions
Have a spouse who can access super before you
Want to boost your spouse’s super savings
Have or expect to have $1.6 million or more in super but not your spouse
How does it work?
Generally, contributions splitting works on an ‘annual split’ basis. This means, once a year, you may be able to apply to your super fund to request to split eligible contributions made in the previous financial year with your spouse. Generally, you need to apply before 30 June of the following financial year to request to split contributions in the previous year. The splitting of contributions from your super to your spouse’s super will be treated as a contributions-splitting super benefit. Eligible contributions you split in favour of your spouse will not count towards your spouse’s concessional contributions cap. This is because the contributions, when originally paid into your fund, were assessed against your own concessional contributions cap.
Personal deductible contributions are contributions you make to your super for which you can claim a tax deduction.
Concessional contributions
Concessional contributions are generally subject to 15% contributions tax in your super fund up to set limits. They generally include employer contributions such as Super Guarantee, salary sacrifice contributions and personal contributions for which a tax deduction has been allowed.
Concessional contribution caps
An annual cap on concessional contributions applies each financial year. For the 2018/19 financial year the cap is $25,000 regardless of your age. If you exceed the cap, excess concessional contributions will generally be included in your assessable income and taxed at your marginal rate. You will be entitled to a tax offset equal to 15% of your excess concessional contributions.
Before splitting
You should be aware that splitting contributions:
Is not allowed if your spouse is age 65 or over, or is between preservation age and 65 and has retired
Is not allowed if you have rolled over or withdrawn your entire benefit
Is not offered by all super funds
Is subject to preservation rules and contributions generally cannot be accessed until you retire on or after preservation age or you reach age 65
If you are interested in learning more about contributions splitting and think it could benefit you, please do not hesitate to contact us via phone or email.