Noel Whittaker's Blog Superannuation is always under attack, no matter which party holds government One thing is clear – you should always be on the lookout for strategies to prevent the consequences of changes that are certain to come in the future.
One strategy is simple, legal, and highly effective -splitting your superannuation with your spouse. To be eligible, the receiving spouse must be under age 65 and, if over preservation age, not retired. Where the receiving spouse turns 65 during the year of the split, action will need to take place before their birthday.
The transfer MUST be completed by 30 June.
Provided that the contributing member has a sufficient account balance, the amount that can be split is the lesser of 85% of the concessional contribution or $25,000. This means that, where the contributing spouse has made a $25,000 contribution, the maximum split would be 85% or $21,250. If, however, the contribution had been $40,000, an excessive contribution that could easily occur due to employer SG contributions, the amount that could be split would be $25,000.
Think about Mike, aged 56. He earns $145,000 a year and is contributing $25,000 a year to superannuation.
He already has over $700,000 in superannuation but his wife Helen, who has a casual job, has very little. His deductible contribution of $25,000 will still be liable for the 15 per cent contributions tax, but he can ask his fund to put $21,250 of it into her superannuation account.
Super splitting doesn’t get Mike out of the 15% contributions tax, but it still has advantages. First, it would enable the couple to maximise the amount that could be withdrawn tax free if either one, or both, both stopped work between their preservation age and 60.
The strategy can be especially useful if there is a significant age difference. If Helen was older than Mike she would reach age 55 or 60 before him and so be able to enjoy the tax and access benefits that come at those ages. If she was younger than him, their Centrelink benefits could be maximised, as money in superannuation is not counted until the owner reaches pensionable age.
Suppose Mike turned 67 when she was 57. Subject to any restrictions in place then He could cash out a large chunk of his super tax free and put it into super in her name as a non-concessional contribution and, subject to other assets, get a part aged pension and all the benefits that go with it.