Superannuation contributions splitting is a means by which couples can share in the benefits of superannuation over their working lifetime by allowing a member of a superannuation fund with an accumulation interest to split certain contributions with their spouse.
What are splittable contributions?
Generally the contributions that can be split are taxed splittable contributions. Taxed splittable contributions generally include employer contributions (such as salary sacrifice contributions and superannuation guarantee (SG) contributions) and personal contributions for which a tax deduction has been claimed.
Limit on amount splittable contributions
The limit on taxed splittable contributions is capped at the lesser of:
- 85% of concessional contributions made for that financial year; and
- the individual’s concessional contributions cap for that financial year.
- The following types of contributions will be included in an individual’s concessional contributions cap:
- Employer contributions (including super guarantee and salary sacrifice) except for those contributions made to a constitutionally protected fund (eg GESB West State Super)
- Employer payments to the fund, to cover fees and expenses payable by the fund on the members behalf, such as insurance premiums
- After-tax contributions for which a personal tax deduction has been claimed
- Notional taxed contributions (defined benefit funds)3
- Certain allocations from reserve accounts in a super fund
What is the individual’s concessional contributions cap for the financial year?
The standard concessional contributions cap was previously $25,000 for the 2013/14 financial year and has now increased to $30,000 for the 2014/15 financial year as a result of indexation.
A higher concessional contribution cap of $35,000 p.a. is available for individuals aged 49 or over on 30 June 2014.
Further information on the concessional caps can be found in our previous budget update.
Allowable time frame for splitting contributions
Individuals can apply to split contributions:
- in the financial year following the financial year in which the contributions were made; or
- during the financial year in which the contributions were made. This is only possible if the member wishes to fully exit the fund (rolled over, transfer or cash out the entire benefit) before the end of that financial year.
Can all spouses receive a splittable contribution?
Splitting applies to married couples, de facto couples and same sex couples. It is not compulsory for superannuation funds to offer splitting therefore individuals should check with the superannuation fund concerned prior to contributing. A splitting application is invalid if the member’s spouse has reached the age of 65 or is between preservation age and age 65 and has retired.
|Preservation age People born||Preservation age|
|Before 1 July 1960||55|
|1 July 1960 to 30 June 1961||56|
|1 July 1961 to 30 June 1962||57|
|1 July 1962 to 30 June 1963||58|
|1 July 1963 to 30 June 1964||59|
|After 30 June 1964||60|
Benefits of splitting
Splitting can be an attractive option for some couples. Situations where it may provide benefit include:
- Transferring contributions into the account of a spouse who is either:
– closer to retirement so that it can be accessed earlier as cash or
– closer to preservation age so it can be accessed earlier as a transition to retirement pension or;
– closer to the age of 60 where it can be received tax free.
- Transferring contributions into a younger spouse’s account who is under age pension age where the older spouse is over age pension age. This transfers amounts which would have counted towards the income and assets tests for the older spouse into the younger spouse’s account where it is not counted for social security purposes, until the younger spouse reaches age pension age.
- Providing some protection for younger couples against the legislative risk of changes to taxation law in the future.
- Re-distributing superannuation monies to ensure both low rate cap amounts ($180,000 for 2013/14 and $185,000 for 2014/15) are utilised if accessing superannuation between preservation age and age 60.
- Re-distributing superannuation monies between couples to provide a certain level of comfort or “peace of mind”.
The effectiveness of a superannuation splitting strategy will depend on each couples particular set of circumstances, and should be reviewed at least annually together with a broad review of your financial position.