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Urgent Superannuation Contribution Splitting Deadline for Aussie Couples
Aussie couples have until June 30 to leverage a superannuation strategy that could enhance their tax savings, improve their Centrelink age pension qualifications, and potentially accelerate their retirement savings. Derek Gascoigne, UniSuper’s State Manager of Advice, emphasised the urgency for couples looking to benefit from super contribution splitting for the 2023-24 financial year.
Understanding Contribution Splitting
Super contribution splitting allows couples to shift up to 85% of concessional super contributions made in the previous financial year from one partner’s account to another. This process must typically be initiated following the end of the financial year, and the clock is ticking for those looking to split contributions made in 2023-24.
Gascoigne noted, “Once we hit July 1, 2025, you can only split contributions from the 2024-25 year forward.” Therefore, couples are encouraged to act promptly to maximise their benefits before the impending deadline.
Key Eligibility Criteria
Couples can only split concessional contributions, which encompass both employer and personal contributions. Importantly, there are no age restrictions for the partner making the split, though the receiving partner must be under 65 years old or aged between 60 and 65 if not retired.
To proceed, couples must manually apply with their super fund by June 30, as not all super funds offer this scheme. Gascoigne advised, “It’s crucial to check if your super fund provides this option and complete the necessary forms.”
Example of Contribution Splitting Process
For instance, if an individual has made $30,000 in gross concessional contributions (the current cap), they can shift up to $25,500 of this to their partner’s super account, as this contribution will be taxed at 15%.
Additionally, the Australian Taxation Office (ATO) allows couples to utilise carry-forward rules, which permit individuals to roll over unused concessional contributions from the past five years. This means if one partner contributed $60,000 last financial year, they could transfer 85% of that amount ($51,000) to their partner’s super by June 30 without it counting toward the partner’s cap.
Strategic Advantages of Contribution Splitting
Gascoigne highlighted several strategic benefits of contribution splitting. This manoeuvre could lead to significant tax savings by equalising super balances across partners, which might enable both parties to retain more in tax-free environments during retirement.
“In many cases, one partner may have a larger super balance, resulting in potential tax implications down the line,” he explained. This strategy could also mitigate risks associated with the government’s new proposed tax rate for super earnings beyond $3 million, which is set to increase from 15% to 30%.
Moreover, couples with age discrepancies may find this strategy advantageous. Regularly shifting super from the younger to the older partner could facilitate earlier access to funds for income streams or debt repayment.
By redistributing super, you could reduce assessable assets for Centrelink age pension assessments, allowing younger partners’ funds to remain exempt until they reach age pension eligibility.
Considerations Before Splitting
Before making a decision to split contributions, Gascoigne recommended evaluating the implications of the receiving partner’s super fund, particularly in terms of fees and investment risk. “Are you transferring from a low-fee fund to a higher-fee option? Is that in your best interest?”
It’s also advisable to consult your individual super fund for any administrative deadlines, and seeking financial advice may help clarify whether this strategy best suits your situation.
Conclusion
As the deadline for super contribution splitting approaches, couples should act quickly to explore this opportunity to save on taxes and potentially improve their retirement outlook. This proactive approach could yield substantial financial rewards, making it a crucial consideration for those navigating their superannuation options.
