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Should I split my super with my partner?

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I keep hearing about the benefits of splitting my super with my wife and as she has been home with the kids for some time and I have progressed in my job, I would like to help bump up her super.

Is this a good idea? Is it tax-effective? And how do I go about it?

It’s open for all couples – married, de facto and same sex – and it only allows you to split concessional contributions, which are usually made up of your compulsory super that your boss pays – nine per cent of your normal wage which includes ordinary hours worked, earnings for over-award payments, shift loadings and commission.

While you could always give your wife money so she can contribute up to $150,000 to her super fund as undeducted contributions, there are some amounts that are unsplittable. These include rollovers from another super fund, existing super benefits in your fund and contributions made after 1 January 2006, termination payments, capital gains tax-exempt amounts from selling a business that you owned by yourself and undeducted contributions made after 5 April 2007.

The split is made after a financial year and happens by asking the trustee of your super fund to split the contributions you put in the fund in the year that has just ended. This is a bit complicated but if you were rolling over or transferring your entire super in any one financial year, you can apply for a split to happen before the end of the financial year.

The maximum amount you can split is 85 per cent of your total concessional contributions. Why 85 per cent? Well if you put in $100,000, which would mean you were on a very big income, 15 per cent is instantly taxed on contribution and so only $85,000 is available for splitting.

If your spouse is over 65 years of age then you can’t split and if your spouse is between her preservation age and 65 and is fully retired you can’t split as well. The amount transferred is viewed like a rollover and it forms a part of the taxable component of the spouse’s super fund as it has received the concessional tax treatment of 15 per cent in the original fund where it was transferred from. This money stays in the fund until the spouse hits preservation age and permanently retires, she hits 65 or she becomes permanently incapacitated.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, August 31, 2011

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