If you have a spouse and have (or are likely to have) more than $1.6 million in super, there are things you can do to improve your situation when you retire.
The $1.6 million cap
From 1 July 2017, there is a limit on how much super you can transfer to ‘retirement phase’ during your lifetime, where no tax will be payable on investment earnings.
This limit is known as the ‘transfer balance cap’ and in 2017/18 it’s $1.6 million. This cap will be indexed in $100,000 increments in line with the Consumer Price Index.
Split Concessional Contributions
If you or your spouse are likely to exceed this limit, you may want to consider trying to ‘equalise’ your super benefits in the lead up to retirement.
One approach to consider is to split up to 85% of your previous financial year’s concessional contributions with your less superannuated spouse.
Concessional contributions include super guarantee, salary sacrifice and personal deductible contributions, as well as certain other amounts.
Re-contribute super
Another option to consider, if you have reached your ‘preservation age’[1] and are permanently retired (or meet another ‘condition of release’), is to cash-out a portion of your super and arrange for the money to be contributed into your spouse’s super account.
Furthermore, if you make the contribution into your spouse’s super account and your spouse earns less than $40,000 pa, you may be eligible for a tax offset of up to $540.
Alternatively, if your spouse makes a personal non-concessional contribution into their own super account and earns less than $51,813 pa, they may be eligible for a Government co-contribution of up to $500.
It is important to note, the re-contribution strategy is limited by the relevant non-concessional contribution caps, however, the ‘bring-forward provision’ may be available for activation, speak to your adviser to find out your eligibility and the limits that apply to you.
Seeking advice
You should seek professional advice or guidance from a financial adviser when deciding on the best superannuation solution. You should also seek advice from a registered tax agent to determine the tax implications.
To find out more about the information in this article please contact:
- Ryan Kelly (Western Australia) ryank@spfgroup.com.au or 0432 051 778
- Stevie-Jade Turner (Eastern States) steviet@spfgroup.com.au or 0433 313 099 today.
[1] Preservation age is 55 for those born before 1 July 1960 and gradually increases to 60, depending on your date of birth.