You can split your pre-tax super contributions to help boost your partner’s super balance and possibly save yourself some tax.
How does contribution splitting work?
You can top up your spouse’s super and possibly save yourself some tax by giving them (husband, wife, de facto or same-sex partner) some of your pre-tax contributions (also known as concessional contributions). Concessional contributions that can be split include your employer’s super guarantee contributions, amounts you have salary sacrificed and contributions you have claimed a deduction for (for example, after- tax contributions you have claimed a deduction on).
The maximum amount you can split is the lesser of:
- 85% of your concessional contributions, and
- the concessional contributions cap of $25,000 per year across all your super funds. From 1 July 2021, the cap will increase to $27,500 per year.
Generally, your contributions can only be split after the conclusion of the financial year in which the contribution is made and only in that financial year. For example, contributions made in 2019/2020 can be split in 2020/21 only.
However, if you intend to roll over your entire super balance (for instance, to another super account or to a pension account) before the end of the financial year, you must apply to split your contributions within the same financial year so the split occurs prior to the rollover.
Visit the ATO website for more information about contribution splitting.
How can I or my spouse benefit from contribution splitting?
Here are a few scenarios where you or your spouse may benefit from splitting super:
- You wish to help grow your spouse’s super as they have taken time off work to have a child.
- Your spouse is younger and you have reached the Age Pension and wish to increase the amount of Age Pension you receive from the Government.
- You are nearing the general transfer balance cap, which limits the amount you can hold in account-based pensions such as RetireSmart and RetireChoice. Your transition to retirement income streams will only be assessed against the transfer balance cap if you reach 65 or have met other conditions of release. The cap is currently $1.6 million and will increase to $1.7 million from 1 July 2021.
- Your wish to keep your total super balance below $500,000 so you can carry forward your unused concessional contributions cap to a later year.
- You wish to keep your total super balance below $1.5 million so you can access the non-concessional bring-forward arrangement and stay below the $1.6 million general transfer balance cap. Note that the cap will increase to $1.7 million from 1 July 2021.
Who can take advantage of contribution splitting?
If your spouse is below their preservation age or is under 65 and not retired, you can split a portion of your concessional contributions.
Contributions splitting does not reduce the amount counted towards your concessional contributions cap. Superannuation funds report all the contributions that were made for you to the Australian Tax Office, including any contributions that were later transferred to your spouse after a contributions splitting application.
How do I know if contribution splitting is suitable for us?
If you need help with assessing whether contribution splitting is suitable for you and your spouse, you can make an appointment with one of our financial advisers.
What do I need to do to participate in contribution splitting?
Complete the Contribution Splitting form to split your concessional contributions with your partner.
What do I need to do if I wish to split contributions that I intend to claim a deduction for?
If you wish to apply to split contributions that you intend to claim a tax deduction for, you need to complete the Notice of Intent form, which you can download from the ATO website, prior to applying to split the contribution.
You can either email the completed form to email@example.com or post it to PO Box 656, Burwood NSW 1805. For more information about the Notice of Intent form, visit the ATO website.
How is contribution splitting different from spouse contributions?
Spouse contributions involve making an after-tax contribution to your spouse’s super. Read the Spouse contributions article to find out more.
Any advice contained on this webpage is of a general nature only, and does not take into account your personal objectives, financial situation or needs. Prior to acting on any information on this webpage, you need to take into account your own financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek independent financial advice if you are unsure of what action to take.