Sharing your super. Are you aware that you or your spouse may be able to split your collective superannuation balances evenly between you to increase the lower balance fairly? Here’s how!
Thanks to the Tackling the Gender Super Gap Bill recently introduced into Parliament, the partner in your relationship who has the higher super balance may soon be able to roll over an amount from their fund to the other spouse’s super fund during the accumulation phase.
The result will be to make the two funds of the spouses more even.
And the reason behind it is to create fairness by addressing the gender super gap which has persisted for decades, created in part by women taking time out of the workforce to raise a family, or to care for elderly parents. This has been described as the “mother penalty”.
The Bill also aims to ensure that superannuation should acknowledge shared contributions beyond employment.
Couldn’t you do this before?
There are currently some limited ways to even up super balances between spouses.
Concessional superannuation contributions, like compulsory super contributions from your employer, can be split to a spouse’s super account on an annual basis. An individual can also make personal after-tax contributions directly to their spouse’s superannuation account. But these are both very slow ways to even up super balances between spouses.
A splitting arrangement for super balances has in fact been in place for some time as well, however in a different context – in divorce settlements where the super could be rolled over from one spouse’s fund to the other. So the argument of Senator Hume who introduced the Bill was, if you can do it when a relationship is over, why not do it while the relationship is still active! A new option, not a mandate.
It is not a legal requirement for spouses to adopt this new mechanism. Within the rules below, it is entirely up to the spouses whether they make their super balances equal. But there are limits on the use of this mechanism
The following guardrails will apply once the new mechanism is in force. This mechanism is only available to spouses in accumulation phase, not in a pension or drawdown phase; and with only one superannuation account.
This mechanism is not available to a spouse transferring to or from a defined benefit scheme. When the amount is rolled over it will maintain the donor fund’s proportion of concessional and non-concessional and taxed and untaxed characteristics. To ensure that the amount transferred does not avoid or attract any additional taxes, it will be treated as an amount “rolled over” rather than considered as a contribution.
There is a limit on the amount that can be rolled over between spouses, known as the “spousal redistribution limit”. The amount rolled over cannot leave the donor fund with a lower balance than the receiving fund; or result in the receiving fund having a higher balance than the general transfer balance cap (currently $2m).
So, once this Bill is passed, it will be up to you and your spouse to take up this new opportunity, the choice is yours! It’s an opportunity to address and redress the inequity in the employment-based contribution to the wealth of many relationships. If this is an option you’d like to take up once the legislation is passed, we can guide you through the legislative requirements and limitations to ensure your contributions are shared evenly.
If you’re unsure about your personal or business situation and would like some support and guidance, please reach out.
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