Superannuants can use their five-year carry-forward unused concessional contributions amount cap when splitting their superannuation contributions with their spouse, according to a recent Colonial First State podcast.
“The legislation refers to the concessional contributions cap, rather than the standard concessional contributions cap, which is good news,” Colonial First State senior technical services manager Linda Bruce said in reference to the strategy where a fund can split up to 85 per cent of a member’s concessional contributions from the previous financial year to their spouse’s super account.
“From the legislation perspective, if the client was eligible to use the five-year carry-forward unused concessional contributions amount, which requires the total super balance to be lower than $500,000 at the previous 30 June, now their concessional contributions cap would include the carry-forward unused concessional contributions amount,” Bruce said.
Colonial First State head of technical services Craig Day noted one of the most asked questions from advisers concerning this strategy was whether the cap referred to the annual cap or if it could also include the five-year unused carry-forward amount.
Day used the example of a client who made a $100,000 personal deductible contribution last year, which was within the client’s concessional cap, including their carried forward unused concessional contribution cap amount.
According to the legislation, the client can request their super fund to contribute $85,000, which is 85 per cent of their total concessional contribution, to their spouse’s super, provided all other eligible criteria are met.
Day said this little-known detail about the strategy makes it even more attractive in certain situations.
“Splitting concessional contributions into a spouse’s super fund … can offer a range of valuable benefits for clients. For example, it can help equalise super balances between spouses, which is important for maximising super contribution opportunities and optimising the amount that can be invested in tax-free pension accounts and even potentially help manage the upcoming division 296 tax,” he said.
