SMSF Strategy Guide: Online Library

Concessional Contribution Strategies

SMSF Education
Smsf strategy guide: Online library

Splitting Concessional Contributions with Spouse

BACKGROUND

For many couples, particularly where one member is working full time and the other member is only working part time or not at all, a large imbalance of SMSF account balances can occur over time. The strategy of splitting concessional contributions with your spouse is a method to try and address this.

WHY USE IT

This is a longer term strategy. Its not about trying to get a big benefit now. With the advent of the total super balance limits / and transfer balance caps (currently $1.6 million per person), this strategy is about balancing out those contributions and using up both members maximum limits prior to retirement.

THE RULES

  1. Concessional contributions can only be split with your spouse (both legally married and defacto).
  2. The types of contributions that can be split are concessional contributions only, such as salary sacrifice, employer contributions, and personal contributions that you claim a tax deduction for.
  3. If you are the one splitting your contributions, then you can be any age.
  4. Your spouse receiving the funds however must be less than their preservation age, and if aged between preservation age and 65, must not be retired.
  5. If you are the one splitting your contributions, this does not reduce the amount that is counted towards your concessional contribution cap.
  6. Only up to 85% of your concessional contributions can be split with your spouse (as this factors in the 15% contributions tax your SMSF will have paid on the original contribution). This amount also needs to be no more than your concessional contributions cap for that year. Note that this also interacts with the carry-forward provisions for unused concessional contributions, so your concessional contributions cap may be higher than the general cap.
  7. The splitting application is made in the financial year after the contributions are made.

EXAMPLE

Tom has received $15,000 of employer contributions into his SMSF member account over the 2018/2019 year. He advises his SMSF administrator in the 2019/20 year that he wishes to split this evenly with his wife, who is also a member of the SMSF.

The SMSF lodges a Superannuation contributions splitting application to the ATO in 2019/20, indicating he wants to split $7,500 with his wife.

The trustees of the SMSF can accept the application as the split amount is both less than Tom’s concessional contributions cap, and less than 85% of the $15,000 of employer contributions.

Tom’s SMSF administrator will transfer $7,500 to his wife’s member account.

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