Super Contribution Splitting

Superannuation contribution splitting has moved a step closer to being a reality, with the Government releasing draft regulations for industry comment.

It is now intended that contribution splitting will commence from 1st January 2006, six months earlier than previously announced.

It is proposed that, after 30th June 2006, a fund member will be able to advise their trustee to split up to 100 per cent of any contributions made since 1st January 2006 and transfer the contributions to their partner's superannuation account. The same can then be done at the end of each subsequent whole financial year.

The intention is for a couple to have access to two reasonable benefit limits and two ETP tax-free thresholds in retirement. It will also allow non-working partners to have their own superannuation.

Following the removal of the surcharge, the introduction of transition to retirement pensions and improvements to term allocated pensions and allocated pensions, this initiative provides a strong incentive for many married clients who can afford to contribute more to super. It provides another means by which super contributions for higher income earners need not be limited by the lump sum RBL.

However, contribution splitting will not be right for everyone and the benefits need to be considered carefully. There will be the added expense of maintaining multiple superannuation accounts, possibly requiring advice each year to determine if it is beneficial to transfer

The benefits of splitting also need to be weighted up against other benefits such as a low income partner making contributions themselves and receiving the Government co-contribution.

Geoff O'Neil - Director Advantage One
Strategic Financial Coach
Wealth Creation