Super Splitting — The Wait is Over

Superannuation splitting between spouses is now available. It is important to note that super splitting refers to contributions to superannuation, not existing superannuation balances.

Superannuation splitting is available to married couples and also to people in de facto relationships from 1 January 2006. It is intended to assist families to maximise superannuation investments and to provide an avenue for couples to share their superannuation benefits. This is particularly important for couples where one spouse is receiving a low income or has a lower superannuation balance due to time out of the workforce.

For employees, up to 65 per cent of employer contributions (including Superannuation Guarantee contributions and any salary sacrifice contributions you have made) can be split, and 100 per cent of undeducted contributions Qe personal contributions for which no tax deduction has been claimed).

If you are self-employed, you can split up to 85 per cant of your deductible contributions and 100 per cent of undeducted contributions. Contributions made and benefits accumulated prior to 1 January 2006 cannot be split.

You will not be able to take advantage of super splitting if:

    * your spouse (the receiving spouse) is aged 65 years or more or if he or she has reached age 55 and is permanently retired;

    * you are a member of a defined benefit fund; or

    * your fund chooses not to offer super splitting.

There can be major financial advantages in superannuation splitting. When withdrawing superannuation benefits in retirement, each person can withdraw a tax-free amount of $129,751 (limit for 2005/06, indexed annually). By splitting superannuation benefits with your spouse, the limit effectively doubles, taking the combined tax-free lump sum to over $250,000.

Effective income splitting can be achieved by splitting superannuation benefits with your spouse then using your superannuation benefits to commence an income stream in retirement. This allows you to each use your tax-free threshold, resulting in a reduction in the income tax payable on individual income streams. This can be especially effective for individuals who have accumulated large amounts in superannuation. Superannuation splitting may assist to maximise the amount of benefits that can be concessionally taxed.

Superannuation splitting is now a key component of financial planning for all couples. Contact your financial adviser today to discuss how super splitting can be used to maximise your retirement savings.

Disclaimer:

No investment advice provided to you.
This web site is not designed for the purpose of providing personal financial or investment advice. Information provided does not take into account your particular investment objectives, financial situation or investment needs.

You should assess whether the information on this web site is appropriate to your particular investment objectives, financial situation and investment needs. You should do this before making an investment decision on the basis of the information on this web site. You can either make this assessment yourself or seek the assistance of any adviser.