‘What’s mine is yours’ is the general mantra when it comes to finances in a marriage or de facto relationship.
But on paper, some Australian couples find one person in a relationship has a significantly higher super balance.
A super expert tells FEMAIL that the opportunity to ‘even up’ unbalanced super amounts between spouses is an underused tax time trick in Australian households, and could potentially see one person’s retirement savings increased by upwards of $100,000.
UniSuper senior advice manager Derek Gascoigne explained to FEMAIL that super contribution splitting is an overlooked financial strategy that could be useful for many couples – and is worth considering as the end of the financial year approaches.
‘Super contribution splitting is the process of splitting before-tax contributions – such as the employer super guarantee or salary sacrifice contributions – from one spouse’s super account to the other’s account,’ Derek explained.
The expert said that one person in a relationship ‘can split up to 85 per cent of before-tax contributions up to the individual’s concessional contribution cap, which is currently $30,000 (subject to change in future financial years)’.
‘This could be higher if they’re eligible for any unused concessional contribution cap over the past five years,’ Derek added.
The financial expert told FEMAIL that there are numerous beneficial reasons why married or de facto couples may want to consider transferring super from one spouse to the other – however, whether it is worth doing will be entirely dependent on each couple’s unique circumstances.
A super expert told FEMAIL that the opportunity to ‘even up’ unbalanced super amounts between spouses is an overlooked financial strategy
For instance, it may be worth exploring in the event that one spouse has either been out of the workforce for significant periods (perhaps while starting or caring for family), or, has substantially lower earnings than the other person in the relationship.
In this circumstance, Derek said that super splitting to a lower income or non-working spouse offers the chance to ‘even up’ super balances between spouses.
‘Anyone who’s been out of the workforce for some time may have a lower amount in super. Contribution splitting from their spouse can boost their super balance and help them catch up,’ Derek explained.
‘This can be further accelerated if the person has returned to work after some years off and has less than $500,000 in super,’ he continued.
‘They may be able to also make their own before-tax contributions using their unused contribution cap from the past five years, which could be up to $132,500.’
Super contribution splitting could also assist with ensuring the person in the relationship with a lower balance has ‘sufficient funds to pay premiums for insurance cover held in super’.
In addition, Derek said that there were also benefits to the person in the relationship with a higher super balance – particularly as that person approaches retirement.
The super advice manager explained that evening up super balances maximises each spouse’s benefits under their transfer balance cap, meaning more wealth could be held in the tax-free investment environment of the retirement income phase than what otherwise could have been the case.
Super contribution splitting is available in Australia between spouses in a married or de facto relationship, but there are certain limitations around its applicability
A different situation that is worthy of exploring super contribution splitting is in when spouses have a wide age-gap.
‘When one member of the couple is older, the younger spouse could split their super contributions to the older spouse, who may be able to access their benefit at an earlier date,’ Derek explained.
Another potential benefit in this instance is that ‘splitting contributions with a younger spouse could result in greater Centrelink or Department of Veterans’ Affairs (DVA) pension entitlements when it comes time for the older spouse to apply for those benefits’.
However, Derek noted that there are certain limitations when it comes to super contribution splitting – the first being that it’s only available between spouses in marriage or de facto relationships.
Age is also a factor. People over 65 are not eligible for super contribution splitting and it’s also unavailable to people at ‘preservation age’ (currently age 60 or over) who are permanently retired.
There are also limits around the amount of super that can be split, with Derek reiterating that a spouse can ‘split up to 85 per cent of the before-tax contributions, up to the individual’s concessional contribution cap’. The cap is currently $30,000, but is subject to change in future financial years.
Super contribution splitting is also something that you need to apply for through your super fund – and Derek notes that not all funds offer it, while some may charge a fee to arrange it.
‘Check in with your fund to see what their process is,’ Derek suggested.
‘If your fund does allow splitting, there will be a form to complete – the fund may have their own form or use the ATO form.’
UniSuper senior advice manager Derek Gascoigne clued FEMAIL in on the overlooked strategy of super contribution splitting
It’s also important to note that this is not a ‘set and forget’ process.
A super contribution splitting application applies only to the previous financial year – meaning you will need to re-lodge it after each financial year that you want it to be applicable to.
‘You can only make one application to split per year and the spouse can be with the same or a different super fund,’ Derek added.
As the end of the current financial year nears an end, this means that any super splitting contribution applications for the 2023/2024 financial year would need to be lodged ahead of June 30.
Although it may sound complicated, Derek says a chat with a financial advisor is the best course for determining whether super contribution splitting is a beneficial financial strategy option for you and your spouse.
The UniSuper senior advice manager said: ‘The benefit of super contribution splitting will depend on the individual’s situation and it isn’t a ‘one size fits all’ strategy. Ideally, a financial adviser can assist with determining if this strategy can help you.’
DISCLAIMER: The information in this article is of a general nature and doesn’t consider your personal circumstances. Before making decisions, you should consider whether the information is appropriate for your circumstances otherwise seek financial advice.
UniSuper Advice is operated by UniSuper Management Pty Ltd ABN 91 006 961 799 AFSL No. 235907.
