Super Contribution Splitting
Dolfinwise Super Strategies
Super splitting can be a very powerful tool to help couples who have an age difference between them qualify for extra or some social security. Clients with too many assets to qualify for aged pension and benefits in usual circumstances have gained significant extra benefits through obtaining advice in this area. Super Splitting can also be used to aid estate
planning, taxation management and may also allow clients access to a higher concessional contribution cap in the future.
Contributions can be split with the contributor’s spouse with the split being made after the end of the financial year. When a person opts to roll over their benefits to another fund, they can make a request to the original fund to split their funds for that financial year prior to rolling over.
Superannuation contribution splitting allows a couple to build two separate superannuation accounts even if one spouse is on a low income or not working. This may give couples earlier access to their superannuation savings if the spouse is older than the member. If the spouse is younger, super splitting may also help to reduce Centrelink assessable assets for retirement, as assets held in the name of a person who is below age pension age are not assessed by Centrelink.
Super splitting may potentially provide members with access to a higher concessional contributions cap after 1 July 2014. The Government is proposing that from 1 July 2014, those aged over 50 and have superannuation balances of less than $500,000 will have access to a concessional contributions cap $25,000 higher than the standard concessional cap. Splitting superannuation contributions may assist members in keeping their super balance below $500,000, allowing them to access the higher concessional contributions cap.
In general, a member can only split eligible contributions in the financial year following the year in which the contributions were made. The only exceptions to this rule apply where the member is cashing out or rolling over their entire benefit to another super fund.
Superannuation contributions can be split with a spouse or Defacto partner up to 85% of all concessional contributions for the financial year comprising of employer contributions (including salary sacrifice)
and personal deductible contributions . Non-concessional contributions of any type cannot be split.
An application to split superannuation contributions must be either made:
- in the following financial year (i.e. application must be made between 1 July following the end of the financial year in which the contributions were made and the following 30 June, or before the super fund’s own cut off date), or
- during the financial year if the entire benefit is to be cashed out or rolled over in that financial year.
The member will also have to provide evidence to the Trustee of the regulated superannuation fund that at the time of the application the receiving spouse:
- has not reached preservation age, or
- is between preservation age and 65 years of age and has not retired.
If a member intends to claim a personal tax deduction for personal contributions made to superannuation, a notice must be lodged before the superannuation contributions splitting application can be lodged. If the notice is lodged after the application to split, no deduction will be allowed.
For more information on spouse splitting super contributions and other super strategies, click here to read our Super Strategies eBook.