How couples can keep their super balance growing more evenly
If you are a member of a couple and want to build your super balance tax effectively, now is a great time to look at superannuation spouse contribution splitting.
The government introduced this policy to allow couples to ‘even up’ their respective account balances where one member of the couple may be a non-working or low-income spouse, but it also creates valuable opportunities for strategic planning.
How does it work?
The higher-earning spouse can request their super fund transfer up to 85 per cent of their employer’s Super Guarantee (SG) contributions to their spouse’s super account. Because it’s using money already in the superannuation system there is no impact on household cashflow.
Although the maximum that can be transferred is 85 per cent, the couple may decide to transfer 50 per cent (or another amount of their choice), so that each super account can keep growing evenly.
The type of contributions that can be ‘split’ are technically called ‘concessional contributions’. This is most often employer SG contributions but could also include salary sacrifice contributions if an arrangement was in place during the previous financial year.
Most large super funds have the application forms on their website, and both members of the couple will need to complete and sign the form. Some funds do charge a small administration fee to process the application.
It’s a good idea to look at this in the first half of the new financial year.
Who can it benefit?
Apart from the ridiculously long name - superannuation spouse contribution splitting - it is a smart way for women to keep super accounts growing if they have moved to part-time hours or taken a break from paid employment to look after children.
It can also help in the situation where one member of the couple may have lost their job and hasn’t been able to put any payments into their super. Again, because it does not require using take-home pay, it allows the household to keep their cash for other needs – including debt repayments and keeping a strong emergency reserve.
Keeping super balances growing evenly can help both partners to feel like they’re keeping an equal footing and working as a team on the family finances. It also reduces the gap in super balances that often plague women at retirement. But even better – at retirement it is also more tax effective to have balances evenly split, as it allows a greater pool of money to be held in a tax-free environment.
There are considerations to work through
To be able to receive a contribution transfer from your spouse you must not have retired. You also need to complete the application before you roll funds out of your super or close the account. For couples who have a significant age gap, be aware if you are transferring more to the younger person as you may be locking away super for longer.
As always, it’s wise to get specialist advice to help understand the implications for your personal situation before making any investment or financial decisions.
Want to learn more about super?
Interested in learning more?
Want to learn more about super?
Whether you’ve had the same super fund or investment structure in place for some time, your personal circumstances and balance may have changed – which is why it makes sense to review your arrangements. But where do you start? By using our simple guide, we show you five key areas you should consider when comparing options, which can help make it easier to make a more informed choice about your super and determine the most appropriate solution for you.