Contribution splitting is the process of transferring money from one partner’s super account into the other’s super account. There’s a range of reasons it might be useful, and rules around doing it. Read on to understand why you might do it and how it works.

Who’s eligible to split contributions?

Couples in same or opposite sex de-facto relationships and married couples can split their super. Both of you must be Australian residents.

The receiving spouse must be under preservation age, or between preservation age and 65 and not yet retired.

How does splitting work?

Up to 85% of before-tax (concessional) contributions can be split from one member of a couple to another. Before-tax contributions include super guarantee, salary sacrifice or personal deductible contributions. The split takes place following the end of the financial year in which the contributions were made and is actioned by submitting an application to the super fund of the partner splitting their contributions.

For concessional contributions cap purposes, a contribution that is split to a spouse’s super account only counts towards the originating spouse’s concessional cap. This includes the higher concessional contributions cap that applies under the carry-forward provisions where an individual has a total super balance below $500,000 just before the start of a financial year.

How can splitting be useful?

Managing Total Super Balance limits

Your Total Super Balance (TSB) is the combined total of all your super interests in all of your funds. It is calculated at the end of the financial year, 30 June.

Once your TSB reaches $1.9M, you can no longer make non-concessional (after-tax) contributions.

Contribution splitting can help manage the TSB, by directing more super to the member with the lower balance. It offers an opportunity to collectively get more into super than would be otherwise possible where one member’s TSB is approaching the $1.9M.

Pension Transfer Balance Cap

The Transfer Balance Cap (TBC) limits how much you can transfer into tax-free pension phase. For a person commencing a pension, the most that they can transfer into pension phase is $1.9 million. Similar to the above strategy, contribution splitting can be used to even up balances, and maximise the amount that can be collectively transferred into pension phase.

Earlier access to tax-free super benefits

Contribution splitting might help a couple access their super benefits earlier, where one spouse is older than the other. When a person reaches 60 years of age, and has retired, they can withdraw their super benefits tax-free. With this in mind, the younger spouse can split their own contributions to the older spouse, and together they can access more money sooner.

Improving Centrelink entitlements

When calculating age pension entitlements, super assets will not be considered an assessable asset if the member is under age pension age and is in accumulation phase. For age pension calculations, there might be a benefit in having more money directed to the younger member, thereby reducing the couple’s assessable assets, and increasing the age pension entitlement for the older partner.

Evening out member balances

If your spouse is earning a low income, or has taken time out of the paid workforce, there may be a significant difference in your super balances. Redirecting a portion of your own super savings to your spouse can help boost your spouse’s super and even out the disparity between your balances.

Reducing legislative risk

Adjsting super benefits across both members of a couple could help protect against future legislative risk. For example, the total super balance thresholds could change, or the total super balance restriction could be applied to a broader range of tax or super concessions.

Next steps

1.   Check your fund offers splitting

It’s not compulsory for a super fund to offer contribution splitting. The first thing to do is contact your fund and check whether it’s an option for you. Some funds charge a fee for contribution splitting, so be sure to ask about this as well.

2.   Seek advice

If splitting is an option, you might like to consult your super fund or your financial adviser before making a decision to go ahead. Even if you don’t wish to seek personal advice, it’s a good way to check your understanding. Some things concerning super can be difficult to undo, so it’s important you get it right.

3.   Complete the paperwork

The partner who is splitting their super will need to complete an application. Some funds provide a form for this, so if you’re with an industry or retail fund, check with them.

If your fund doesn’t have its own form, or you’re in an SMSF, you can use the ATO Superannuation contributions splitting application. You will need to send this form to your fund.

There is no specific paperwork for the partner who is to receive the split contribution.

You must complete the form in financial year in which the contribution was split or the following year.

Related articles

Boost your super and claim a tax deduction by making a personal tax-deductible contribution

Using the ‘bring-forward’ rule to make up to three years’ of non-concessional contributions

Help grow your partner’s super savings and claim a tax offset for yourself using the spouse contributions tax offset

General disclaimer

This content is intended only to provide a summary and general overview of the subject matter covered. It is not intended to be comprehensive nor does it constitute advice. We attempt to ensure that the content is accurate and current but we do not warrant the content nor its currency. You should seek professional advice before acting or relying on any of the content.

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