Splitting Superannuation Contributions

TAX TIP – Splitting superannuation contributions with a spouse to maximise access to the $1.6m pension cap.

The ability to split certain contributions with a spouse has generally been available since 1 January 2006.

The attractiveness of this strategy has waxed and waned over the years, as the rules have also changed. An example of a situation where it might currently be worthwhile using the spouse contribution-splitting rules is to split contributions in favour of an older spouse, thereby allowing a couple (i.e., via the older spouse) to obtain access to concessionally taxed superannuation benefits earlier (i.e., than their younger spouse).

However, this strategy should now be considered by all taxpayers who are approaching the proposed $1.6m pension balance cap, which is due to apply from 1 July 2017. That is, the spouse contribution-splitting rules may potentially allow spouses to maximise access to the $1.6m cap, as taxpayers with accumulation entitlements in their superannuation fund approaching $1.6m may be able to split concessional contributions with their spouse (who has a lower accumulation balance) in order to prevent the taxpayer’s account balance exceeding $1.6m in the lead up to their retirement.

This may also allow them to continue making non-concessional contributions under the proposed new contribution limitations, as announced on 15 September 2016 (which will effectively prohibit members from making further non-concessional contributions once their balance reaches $1.6 million).

If you would like to discuss how this tip can help you please contact our office.

Subscribe to our Newsletter