Level the SUPER Playing Field
Superannuation is complex. There are cap limits on contributions, cap limits in pension phase, minimum income stream caps. It is a minefield of rules, regulation and financial jargon to make most of us want to bury our heads in the sand. With the introduction of the transfer balance cap of $1.6m last July, there are more reasons than ever to ensure your spouse (many of whom have a lower super balance) look to increase their balance. Here are 2 options you can consider:
Contribution splitting provides a superannuation member with the opportunity to split up concessional contributions received in a financial year with your spouse. Up to 85% of your concessional contributions (employer contributions and salary sacrifice) can be paid into your spouse’s account each year (you will need to check your super fund will accept spouse contributions). Once the contributions have been transferred to their account, they belong to them. Split contributions are still subject to the preservation rules and can’t be accessed until you reach preservation age and retire or satisfy another condition of release. Super splitting is not available if you are over age 65.
The main advantage of splitting is to share the amount saved for retirement between you. This can:
- provide an effective way of providing superannuation to a non-working or low income spouse
- pay for insurance premiums for a non-working or low-income spouse
- provide superannuation benefits earlier by splitting contributions to the older spouse
- improve your Centrelink position by splitting contributions to the younger spouse, or
- even out fund balance levels between a couple to maximise the use of the $1.6m transfer balance cap
Another consideration is spouse contributions. If your spouse earns under $37,000 pa then you may contribute up to $3,000 to your spouse’s super and be eligible for an 18% tax rebate of up to $540 per annum. The contribution will count towards your spouse’s non concessional contributions. A simple win/win strategy to increase your spouse’s balance and provide you with a tax benefit at the same time.
Seek tailored advice to ensure the strategies you choose are suitable to your goals and the regulations.
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This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs