Australian couples seeking to maximize their retirement savings have a golden opportunity at their fingertips. The strategy, known as super contribution splitting, could potentially save thousands in taxes while boosting pension eligibility. Time, however, isn’t on your side.
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The clock is literally ticking. With the June 30 deadline rapidly approaching, Aussie couples must act swiftly if they want to take advantage of this financial strategy for the previous financial year. Once July 1, 2025 arrives, this window of opportunity closes until next year.
Derek Gascoigne, UniSuper state manager of advice, emphasizes the urgency. “The window to go back and split the 2023-24 financial year is closing rapidly,” he warns. Many couples remain unaware that this option exists, leaving money on the table that could significantly impact their retirement lifestyle.
How Does Contribution Splitting Actually Work?
Let’s break down this strategy into bite-sized, digestible chunks. Super contribution splitting allows couples to transfer up to 85 percent of concessional super contributions made in the previous financial year from one partner to another.
Consider this practical example: if you made $30,000 in gross concessional contributions last financial year (the current cap), after the 15 percent tax, you could transfer $25,500 into your partner’s account. That’s a significant sum shifting from one retirement pot to another.
The beauty lies in the flexibility. If you’ve been savvy with your carry forward rules, the potential increases dramatically. Someone who made $60,000 in concessional contributions could transfer a whopping $51,000 to their partner’s super this year before the looming deadline.
This isn’t counting toward your partner’s contributions cap either. The transferred amount functions more like a rollover between accounts rather than a new contribution, avoiding additional caps or restrictions.
Strategic Benefits That Could Save You Thousands
The financial advantages extend beyond simple account shuffling. There are several strategic reasons why couples might consider this approach, potentially saving thousands of dollars in the long run.
Tax optimization tops the list of benefits. Many couples have imbalanced super accounts – one partner holding significantly more than the other. By equalizing these balances, both partners can potentially hold more money in the tax-free investment environment of the retirement pension phase.
The government has announced plans to increase the tax rate for super earnings from 15 to 30 percent for balances exceeding $3 million. Through contribution splitting, savvy couples might avoid hitting this threshold altogether.
Age differences between partners create another compelling reason to consider this strategy. Couples can strategically move super from younger to older spouses, making funds accessible earlier for starting income streams or paying down debts before full retirement.
Centrelink Benefits You Might Be Missing
The implications for Centrelink age pension eligibility shouldn’t be overlooked. This strategy offers a clever approach to maximize government benefits during retirement.
When splitting super from an older to a younger spouse, you could effectively reduce assessable assets for Centrelink purposes. This works because the younger spouse’s superannuation isn’t counted by Centrelink while they remain under the pension age.
For many retiring Australians, this could mean thousands of dollars in additional pension payments annually. The cumulative effect over retirement years could be substantial, providing a more comfortable lifestyle without depleting personal savings as quickly.
Potential Pitfalls to Consider Before Jumping In
While the benefits are enticing, prudent couples should consider several factors before implementing this strategy. Not every situation warrants contribution splitting, and certain circumstances might diminish the advantages.
Fee structures deserve careful attention. “Are you going from a lower fee fund to a higher fee fund, which would take a bit of the shine off?” Gascoigne questions. The long-term impact of higher fees could potentially erode the benefits gained through splitting.
Investment risk profiles between accounts also merit consideration. If Partner A’s account employs a conservative investment strategy while Partner B’s embraces high-risk options, transferring funds might inadvertently alter your overall risk exposure in ways you hadn’t intended.
The process isn’t automatic either. Contribution splitting requires manual application each year with your super fund before the June 30 deadline. Some funds might have even earlier administrative deadlines, making immediate action even more crucial.
Not all super funds offer this option, as it’s not compulsory for them to do so. Before making plans, check with your provider to ensure they support contribution splitting and understand their specific requirements and paperwork.
How to Take Action Before the Deadline
Getting started requires some legwork but isn’t overly complex. First, contact your super fund directly to confirm they offer contribution splitting and request the appropriate forms.
Complete the application carefully, specifying the amount you wish to transfer to your partner’s account. Remember, you can split up to 85 percent of your concessional contributions from the previous financial year.
Submit the completed forms well before the June 30 deadline. Processing may take time, and any delays could cause you to miss this year’s opportunity entirely.
For those with complex financial situations, seeking professional financial advice could be worthwhile. A financial advisor can assess your specific circumstances and confirm whether this strategy aligns with your broader retirement goals.
Real-World Impact: Beyond the Numbers
The financial benefit extends beyond mere dollars and cents. For many Australian couples, this strategy represents peace of mind and enhanced retirement security.
Consider Jack and Sarah, a couple with a ten-year age gap. By splitting contributions from Sarah (the younger spouse) to Jack, they accessed retirement funds earlier than would otherwise have been possible. This allowed them to pay off their mortgage completely before full retirement, significantly reducing their monthly expenses when their income decreased.
For Thomas and Emma, equalizing their super balances meant they both stayed under the $3 million threshold, avoiding the higher tax rate on their retirement savings. The thousands saved in taxes translated to an extended retirement travel budget, allowing them to visit their grandchildren interstate more frequently.
These real-life outcomes demonstrate how strategic financial planning creates tangible lifestyle benefits. The numbers matter because they directly impact quality of life during retirement years.
Frequently Asked Questions
What is superannuation contribution splitting?
A strategy allowing Australian couples to transfer up to 85% of concessional super contributions from one partner to another.
Who is eligible for contribution splitting?
Couples including married and de facto partners. The receiving partner must be under 65 or between 60-65 and not retired.
Is there a deadline for contribution splitting?
Yes, June 30, 2025 is the deadline for splitting 2023-24 financial year contributions.
How much can be transferred through contribution splitting?
Up to 85% of your concessional contributions from the previous financial year.
Does the transfer count towards my partner’s contribution cap?
No, the transferred amount is treated like a rollover rather than a new contribution.
Do all super funds offer contribution splitting?
No, it’s not compulsory for funds to offer this option. Check with your provider.
What are the main benefits of contribution splitting?
Tax optimization, earlier access to funds for couples with age differences, and potential Centrelink benefits.
Are there any risks with this strategy?
Yes, including potentially moving to higher fee funds or changing your risk exposure.
Can I split contributions from multiple years at once?
No, applications must be made annually before the June 30 deadline for the previous financial year.
Should I seek financial advice before implementing this strategy?
Yes, particularly if you have a complex financial situation, to ensure it aligns with your retirement goals.
The opportunity to potentially save thousands through this superannuation hack is significant. With the June 30 deadline approaching rapidly, procrastination could quite literally cost you money. Review your situation, contact your super fund, and determine whether this strategy could enhance your retirement outlook. The clock is indeed ticking.