Spouses to share benefits of super
SPLITTING of superannuation contributions generally allows a person to split up to 85% of their employer and personal tax-deductible superannuation contributions with their spouse (same or different sex).
Splitting has a number of advantages, including earlier access to superannuation benefits, and tax concessions, tax effective funding of life insurance, maximise super benefits by utilising two low-rate thresholds for taxable withdrawals, access to higher social security payments and hedging against legislative risk.
Preservation of super benefits often means that benefits cannot be accessed until a person reaches their preservation age of 55 to 60, depending on their age.
Splitting contributions from a younger spouse to the older spouse can result in earlier access to benefits like a transition to retirement income stream.
Significant tax savings may also result via access to benefits under the low-rate cap (age 55-60) or tax free on or after age 60.
Tax effective funding of life insurance is another advantage of contributions splitting.
A spouse’s insurance via superannuation can be funded by the higher income earning spouse with salary sacrifice or personal deductible contributions rather than by after-tax contributions.
Care is needed to take into account the concessional contributions cap as contributions are assessed against the splitting spouse’s cap, not the receiving spouse’s.
There are some restrictions to splitting contributions:
- Not all funds allow splitting.
- Non-concessional contributions cannot be split.
- Contributions cannot be split to a spouse who has immediate access to the benefits, that is, has reached their preservation age and is permanently retired or has turned 65.
- Contributions splitting works on an “annual split” model whereby a contributions splitting application is provided to a fund for splittable contributions made in the previous year, or can be provided before rollover.
- The split to the receiving spouse is treated as a “contributions-splitting super benefit” and may be used to set up an account in the same fund or rolled over to another fund.