The benefits of spousal contributions splitting
Posted on 08 August, 2020
by Duc Hong
The contribution splitting rules can be utilised to benefit your clients in a number of ways. To be eligible to split contributions with a spouse, a number of conditions must be met including:
- Can split up to 85% of concessional contributions;
- For personal concessional contributions the member must provide a S290 notice before being able to split;
- The receiving spouse must be under age 65 and if over preservation age must not be retired;
- Splitting notice is generally provided after the end of the financial year unless the member is intending to withdraw their benefit during the year.
Some of the potential strategies include, where:
- The spouse is expected to meet a condition of release earlier than the member, potentially allowing earlier access to preserved benefits than would otherwise be the case;
- One member is likely to exceed the $1.6 million transfer balance cap. This may result in a greater total value being treated as concessionally taxed pension benefits;
- Superannuation benefits can be quarantined in an accumulation account for a younger spouse for Centrelink purposes. This may allow the member to receive at least a part pension for a period of time while the spouse remains under age pension age;
- It may result in a better outcome under a withdrawal / re-contribution strategy particularly if the member expects to work beyond age 65 whereby they would be unable to use the bring-forward contribution rules.
Once a benefit is split it is treated as a transfer or rollover into the spouse’s own superannuation account, which may be with the same fund or an external fund.
Funds are not obliged to offer members the ability to split and it is possible some public offer funds may charge a fee to process requests.