Rather than wait for government to do more to address the gross superannuation inequity that affects Australian women, it’s high time super split chat reared it’s head in the family home.
We know women retire on about 50 per cent less than men, largely because of time spent out of the full-time workforce caring for kids.
This is why super splitting is at least one good strategy worth mulling over but it requires A TALK and agreement with your partner.
We asked Lindzi Caputo wealth manager at HLB Mann Judd for her tips on how to super split and having that chat.
First some pointers
* Splitting before tax or concessional super contributions between partners can be done.
* It’s not possible for couples to split their existing superannuation balances.
* It’s also not possible to split non-deductible (after-tax) contributions, known as non-concessional contributions.
How can women have this conversation with their partners?
“It’s important that women discuss concerns about superannuation with their partner. A catalyst for this could be that it is becoming more topical given the governments focus on individual superannuation account limits and public discussion around the gender pay gap and superannuation adequacy.
“It may become more important for couples to have equal superannuation balances rather than one spouse building a higher balance in light of the government’s proposed $1.6 million cap on pension balances as announced in the May budget.
“This is a conversation that women need to be having with their partner sooner rather than later.
“Using this strategy earlier in life will allow couples to take advantage of the benefits of compounding.
How does super splitting work?
“Where one partner in a committed relationship is receiving contributions from their employer or making personally deductible contributions to their superannuation fund, they can elect to have these reallocated to their partner, or lets just say spouse for word differentiation,” says Ms Caputo.
“The partner receiving the employer super is able to split concessional contributions, which include superannuation guarantee and salary sacrifice amounts paid by the employer or contributions for which a personal tax deduction is also claimed.
“Splitting contributions between spouses can be easier in self-managed superannuation funds as the split contributions can be transferred from the account of one spouse to the other.
“For those with retail superannuation funds (which is what most of us have) the split contribution would be rolled out of the account of one spouse and deposited to the account to the other.
The nitty gritty
Electing to split super contributions needs to be made by 30 June of the year following the financial year in which the contribution is made.
The amount will then be transferred or rolled over to the receiving spouse’s superannuation fund.
To be eligible, the receiving spouse must be under the age of 65 and not have met a condition of release, such as retirement.
Is there a cap on payment?
“Yes. The contributing spouse can split up to 85 per cent of their concessional contribution for that financial year.
“The contribution counts toward the contributions cap of the contributing spouse, not the receiving spouse.
“Tax at 15 per cent on the contribution is paid in the superannuation account of the contributing spouse. No tax is paid on the contribution split into the receiving spouses account.
Why do it?
“Contribution splitting between spouses can be useful in equalising super balances.
“It’s also a strategy that can also be used to boost the superannuation balance of a spouse during a career break such as maternity leave, or to boost the account of the spouse closest to retirement,” says Ms Caputo.
What are the tax benefits?
There are no immediate tax benefits to superannuation splitting.