SMSF, Self managed super, SMSF super, Contributions

Contribution splitting is one of those great strategies that is often under utilised. Given the benefits that it can have it is a wonder it is not taken advantage of more regularly. Let’s learn a little bit more about it.

Contribution splitting is where a member of a super fund chooses to split their contributions made in the prior year with a spouse. There are many reasons why you may wish to do this and they often have great tax benefits. In addition to this we now have the new super fund rules where your member balance is a lot more important than it used to be. Let’s take a look at the benefits and how it is done.

What are the reasons I may wish to split my contributions?

  • One spouse is on a higher income and will benefit more from reducing their taxable income by way of salary sacrificing (see our blog on salary sacrificing to super for a case study where someone on $100,000 p/a may save tax and put an extra $3,510 towards their retirement savings Salary Sacrificing and your contribution caps.)
  • One spouse may benefit more from making additional personal concessional contributions to super (see our blog on the potential tax savings of making personal contributions to super -Making Personal Contributions to Super.)
  • One spouse has a lower balance or is not making contributions to super and are looking to increase their retirement savings
  • One spouse is approaching $500,000 in super and may wish to use the catch-up contribution strategy in the future (check out our blog on this strategy Catch-up of Concessional Contributions.)
  • One spouse is approaching $1.6m in super and may be impacted by the transfer balance cap
  • One spouse is approaching preservation age and you are looking to access more super sooner

There are potentially many more benefits specific to you so get in touch with us now to review your situation so you can maximise from these hidden opportunities.

Which contributions can you split? You are able to split any concessional contributions you have made in the prior financial year. These are any contribution to which someone has received a tax deduction. This includes employer (SG) contributions, salary sacrifice contributions and personal concessional contributions.

When can you split your contributions? You can split contributions after the end of the financial year in which they were made. So during the 2019 financial year you can choose to split your 2018 contributions with your spouse.

How much of my contributions can I split? You can split up to 85% of the concessional contributions made in the previous year. This is because your fund will deduct 15% tax from your contributions and will allow the remainder to be split with your spouse.

How do I go about requesting my contributions to be split? The ATO have a form that you can use here: https://www.ato.gov.au/uploadedfiles/content/spr/downloads/spr19312n15237.pdf

First, you will need to contact your super fund. Most super funds allow contribution splitting but they may have a particular form that they require.

Get in touch with us now if you would like us to review whether this strategy suits your circumstances.

 

This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.