Contribution splitting with your spouse: a strategic approach to retirement planning

As retirement approaches, couples often discover a significant imbalance in their superannuation accounts. This disparity can become crucial when planning for retirement, and addressing it proactively can be beneficial for various retirement strategies.

Understanding total superannuation balance thresholds 

Your individual total super balance as of 30 June each year impacts your ability to implement various super strategies in the following financial year. 

Key strategies where your total superannuation balance (TSB) is a condition of eligibility include: 

• making non-concessional contributions when your TSB is below $1.9 million; 
• utilising carry-forward provisions for large concessional contributions when your TSB is below $500,000; and
• claiming tax deductions for personal contributions at ages 67–74 when your TSB is below $300,000.

You could also potentially avoid unnecessary tax under proposed new tax laws that will impact individuals with a TSB of $3 million or more.

These strategies become particularly valuable when receiving substantial sums near retirement. Speak to your adviser about full details and eligibility rules.

Age Pension considerations 

When planning for retirement, the Age Pension is a consideration for many. The asset test only includes superannuation for individuals of pension age. If there's a significant age difference between spouses, directing more super to the younger spouse could potentially maximise Age Pension entitlement at retirement.

Spouse contribution splitting: a long-term strategy

This strategy allows you to transfer up to 85% of your annual concessional contributions to your spouse's super account. Key points: 

• eligible contributions include superannuation guarantee, salary sacrifice and tax-deductible personal contributions;
• the maximum annual split is generally $25,500 (85% of the $30,000 concessional contributions cap for individuals); 
• only contributions from the previous financial year may be split; 
• the receiving spouse must be aged under 65, or 60–64 and not retired; 
• the split is considered a rollover and doesn't affect the receiving spouse's contribution caps.

Check if your fund offers spouse contribution splitting, as it's not mandatory for all funds.

Timing and eligibility 

Apply for contribution splitting after the end of the financial year in which the contribution was made. If you roll over or withdraw your entire super balance before the financial year's end, you can apply to split the contributions within that same year.

Case study: maximising age pension eligibility 

Daniel (67) plans to retire soon and hopes to receive some Age Pension. His wife Sharon (63) has minimal superannuation. Daniel's substantial super balance would disqualify him from the Age Pension under the assets test. By implementing a spouse contribution splitting strategy, Daniel can boost Sharon's super, reduce his own balance below the asset test threshold, and potentially qualify for a partial Age Pension upon retirement.

Conclusion 

Spouse contribution splitting can help couples equalise their superannuation balances and optimise retirement outcomes. Consider your unique circumstances and seek professional advice to ensure this approach aligns with your long-term financial goals.

Source: ATO - Spouse Super Contributions 
ATO - Superannuation Contributions Splitting - Forms & Instructions