Super splitting and how to maximise your tax-free entitlements

There is a cap on how much you can put into a tax-free pension fund, which was increased to $1.7 million on 1 July, but that limit is per person, which makes sharing your super with a partner super important.

It means that you can double your tax-free super balances by splitting your superannuation contributions, but how does it work?

When you split your contributions, you transfer or roll over a portion of the contributions you recently made to your super account, to your spouse’s super account.

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You can apply to split your contributions when you are any age, but your spouse must be either younger than the preservation age that applies to them or aged between their preservation age and 65 years of age and not retired.

What contributions can be split?
The maximum amount that can be transferred to your spouse each financial year usually depends on the amount and type of contributions made by you or for you in the previous financial year.

It can also depend on the contributions made in the current financial year, but only if your entire benefit will be rolled over, transferred or withdrawn in that financial year.

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Contributions that can be split include:

  • employer contributions
  • salary sacrifice contributions
  • personal contributions for which you can claim a deduction
  • contributions made by family and friends (other than those made by your spouse or for a child under 18 years old)
  • allocations from reserves that are assessable, such as allocations that meet an employer’s obligation to contribute.

Taxed splittable contributions
You can ask your super fund to transfer to your spouse, up to 85 per cent of a financial year’s taxed splittable contributions.

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These are generally any contribution your employer made for you, including salary sacrifice contributions and personal contributions that you made yourself that you have advised your super fund you will claim a tax deduction for.

The maximum amount of taxed splittable contributions you can apply to split is the lesser of 85 per cent of the concessional contributions for that financial year and the concessional contributions cap for that financial year.

Untaxed splittable employer contributions
If you are a member of a public sector super scheme, the employer contributions that are made for you may be untaxed splittable employer contributions.

You can transfer to your spouse 100 per cent of untaxed splittable employer contributions made for you in a financial year, if that amount is less than the concessional contributions cap for that financial year.

However, some public sector schemes are not able to offer contribution splitting.

What contributions cannot be split?
Types of contributions that can’t be split:

  • personal contributions for which you can’t claim a deduction
  • contributions you make with a capital gains tax (CGT) cap election for small business
  • contributions you make with a personal injury election
  • contributions made by your spouse to your super
  • contributions made for you if you are under 18 years old (unless made by your employer)
  • transfers from foreign funds
  • other allocations from reserves
  • rollover super benefit
  • contributions that have already been split
  • government co-contributions
  • government low-income super tax offset contribution
  • first home super saver scheme contributions
  • downsizer contributions
  • temporary resident contributions
  • trustee contributions
  • a super interest that is subject to a payment split (due to a relationship breakdown).

Do you split super contributions with your spouse? Have you spoken to a tax agent about the benefits of splitting your super? Why not share your thoughts in the comments section below?

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Written by Ben