As retirement approaches, couples often find significant imbalances in their superannuation accounts. This disparity can play a crucial role in retirement planning, and addressing it proactively can benefit various retirement strategies.

Understanding Total Superannuation Balance (TSB) Thresholds

Your individual total super balance (TSB) as of 30 June each year affects your ability to implement several super strategies in the following financial year. Key strategies where your TSB is a condition of eligibility include:

• Making non-concessional contributions when your TSB is below $1.9 million.
• Utilising carry-forward provisions for large concessional contributions when your TSB is under $500,000.
• Claiming tax deductions for personal contributions at ages 67–74 when your TSB is below $300,000.

You could also potentially avoid unnecessary tax under proposed new laws that will affect individuals with a TSB of $3 million or more. These strategies are especially valuable when receiving substantial sums as you approach retirement. Speak with your adviser for full details and eligibility rules.

Age Pension Considerations

The Age Pension is an important consideration for many people planning for retirement. The asset test only includes superannuation for individuals of pension age. If there is a significant age difference between spouses, directing more super to the younger spouse may help maximise Age Pension entitlement at retirement.

Spouse Contribution Splitting: A Long-Term Strategy

Spouse contribution splitting allows you to transfer up to 85% of your annual concessional contributions to your spouse’s super account. Key points to consider:

• Eligible contributions include superannuation guarantee, salary sacrifice, and tax-deductible personal contributions.
• The maximum annual split is generally $25,500 (85% of the $30,000 concessional contributions cap for individuals).
• Only contributions from the previous financial year may be split.
• The receiving spouse must be under 65 or aged 60–64 and not retired.
• The split is considered a rollover and doesn’t affect the receiving spouse’s contribution caps.

Check whether your super fund offers spouse contribution splitting, as it is not mandatory for all funds.

Timing and Eligibility

You can apply for contribution splitting after the end of the financial year in which the contribution was made. If you roll over or withdraw your entire super balance before the financial year’s end, you can still apply to split the contributions within that same year.

Case Study: Maximising Age Pension Eligibility

Daniel (67) plans to retire soon and hopes to qualify for the Age Pension. His wife, Sharon (63), has minimal superannuation. Daniel’s substantial super balance would disqualify him from receiving the Age Pension under the asset test. By using a spouse contribution splitting strategy, Daniel can boost Sharon’s super, reduce his own balance below the asset test threshold, and potentially qualify for a partial Age Pension upon retirement.

Spouse contribution splitting can help couples balance their superannuation accounts and optimise retirement outcomes. Consider your individual circumstances and seek professional advice to ensure this strategy aligns with your long-term financial goals.