Spouse Contribution Splitting

Spouse contribution splitting - taylor-hernandez-497481-unsplash (3)

If one partner in a relationship has significantly more superannuation than the other it may be a good idea to equalise your super balances over time. Spouse contribution splitting may provide for better outcomes in the future, such as allowing access to super at different ages and, possibly, reducing tax.

There are ways you can help your partner’s superannuation continue to grow. You can do this by:

  • making a Spouse Contribution to their super account
  • arranging for Contribution Splitting (also known as Super Splitting)
Spouse Contributions

Spouse superannuation contributions can now be made for spouses earning up to $40,000 per year. If your spouse has earnings below $37,000 you can claim the maximum tax offset of $540 when you contribute $3,000 to his/her super.

Under the current 2018/2019 tax rules, you may be able to claim an 18% tax offset on super contributions up to $3,000 that you make on behalf of your non-working or low-income-earning partner. You can contribute more than $3,000, but you won’t receive the spouse contribution tax offset on anything above $3,000.

Super Contribution Splitting

You can split up to 85% of your concessional contributions to your partner.

Splitting super contributions can be popular in the instance where a higher-income earning spouse salary sacrifices contributions (or makes tax-deductible contributions), and then splits the contributions with the lower-income earning spouse. The higher-income spouse gets the tax break and the other spouse gets a larger super benefit.

Typically, there are two main advantages with the contribution splitting strategy:

  1. If you’re planning to retire under the age of 60 and take all or part of the super benefit as a lump sum, then each member of a couple can access their own tax-free threshold for lump sums (relating to the taxable component) of $205,000 (for the 2018/2019 year).
  2. If your partner is a few years older than you, then by splitting super contributions with an older spouse, they can access super benefits at an earlier stage. The older partner also reaches 60 first, which means tax-free super benefits at an earlier time.

Please feel free to contact us if you would like to discuss your options with one of our financial planners.

The information on the Website is of a general nature only and has been prepared without taking into account your, or any other investor’s, particular financial needs, circumstances and objectives. The information on the Website should not be construed as financial, taxation or legal advice.  Lifestyle Financial Services Pty Ltd recommends that you consult a financial adviser for advice that addresses your specific needs and situation before making investment decisions.