Boosting Couple’s Retirement Wealth

More couples are turning to superannuation contribution splitting as a way to grow their combined retirement funds while securing tax and pension advantages, but timing and rules can make or break the strategy. By shifting up to 85% of certain super contributions to their partner’s account, couples could keep both balances below $500,000, dodge proposed tax changes and access Centrelink payments sooner.

Right now, Australians can only split certain pre-tax super contributions from one partner to another and only after the end of the financial year in which they were made. Some funds don’t offer this option, while others may charge a fee. The strategy works particularly well in households where one partner has a higher balance or an older age relative to the other. Keeping super totals under specific thresholds lets couples hold on to more tax benefits and flexibility in managing retirement drawdowns.

For example, someone earning $100,000 annually, with $25,000 in combined employer and tax-deductible contributions, can shift up to $21,250 into their spouse’s fund. That number is based on splitting up to 85% of concessional contributions, which are taxed at a lower rate than regular income. But only certain contributions qualify and they must be split within 12 months of the end of the relevant financial year.

These strategies are gaining attention as more retirees try to make use of contribution caps, Centrelink eligibility rules and the upcoming tax on unrealised capital gains in super balances over $3 million. Splitting may also help couples access catch-up contributions longer, which allow unused caps to be carried forward if the member’s total super is under $500,000.

Professional advisers suggest that super splitting can serve several purposes, paying for insurance within super, preparing for early retirement access if one partner is older, or simply managing assets better between two accounts to keep within regulatory limits. However, because rules vary and splitting doesn’t apply to all contribution types or fund structures, expert financial guidance is essential.

Given the complexity and long-term planning required, this strategy could offer significant benefits, but only if used well ahead of retirement and with full awareness of all eligibility criteria.

Source: The Australian, Attorney General’s Department