Your individual Total Super Balance (TSB) plays a key role in shaping your superannuation strategy for the upcoming financial year. As of June 30 each year, your TSB can affect your ability to use several super strategies. For example, if your TSB exceeds $1.9 million, you may be restricted from making non-concessional contributions. On the other hand, if your TSB is under $500,000, you might be able to take advantage of carry-forward provisions for concessional contributions. Additionally, if you’re between 67 and 74 years old, having a TSB below $300,000 may allow you to claim tax deductions on personal contributions.
Another aspect to consider is the Age Pension asset test. Superannuation is only counted as part of the asset test once you reach pension age. Therefore, if there’s a significant age difference between you and your spouse, shifting more superannuation to the younger spouse could help maximise your Age Pension entitlement upon retirement.
What Is Spouse Contribution Splitting?
Spouse contribution splitting allows you to transfer up to 85% of your annual concessional contributions to your spouse’s superannuation account. This includes superannuation guarantee contributions, salary sacrifices, and tax-deductible personal contributions. However, there are a few key points to be aware of:
- Only contributions from the previous financial year are eligible for splitting.
- The receiving spouse must be under 65 years old or between 60-64 and not yet retired.
- The split is treated as a rollover and does not count toward the receiving spouse’s contribution caps.
Why Consider Spouse Contribution Splitting?
Spouse contribution splitting can be a useful tool for equalising superannuation balances between partners, especially when one spouse has a significantly higher balance than the other. This strategy can also offer long-term financial benefits, particularly when there’s an age gap between spouses. By directing more super to the younger spouse, the couple can better manage their overall superannuation position and potentially increase their Age Pension entitlements.
However, it’s important to note that not all super funds offer spouse contribution splitting. Be sure to check with your fund to see if this option is available.
Is This Strategy Right for You?
Spouse contribution splitting can be an effective part of a broader retirement strategy, but it’s essential to consider your specific financial situation. Consulting with a financial professional can help ensure that this approach aligns with your long-term goals and retirement plans.
