Speaking to SMSF Adviser, Class general manager of growth, Jo Hurley, said while there’s often a lot of focus on how to support women with contributions during career breaks, it’s also important to focus on strategies for the higher-income periods of their lives.
“I’ve had my own SMSF since I was 23 and being an entrepreneur and a working Mum meant that I’ve had times when I’m earning very good money and other times where money has been very scarce,” she explained.
“It can be very difficult during those periods where your earnings are down and perhaps even non-existent to be able to maintain a level of contributions.”
Ms Hurley stressed the importance of focusing on strategies for the high income periods in order to get more into super.
“We need to be thinking about the other side of things where everything is going really well and the income is flowing about how those contributions can be maximised.
“One of the strategies I used when I returned to work and business was really flourishing was to contribute in my spouse’s name and myself and then split that contribution to myself,” she explained.
“So rather than my spouse splitting to me in times when I didn’t have enough ability to contribute, I did the opposite. In periods of high earnings I contributed for both of us and then I split that contribution back to my own account.”
Ms Hurley explained that with a spouse contribution split, only concessional contributions can be split.
“The maximum amount that can be split is the lesser of 85 per cent of the concessional contributions for the year, and the concessional contributions cap, including any additional amounts available because of the carry forward rules,” she stated.
Encouraging data
Based on data from Class users, women are already adopting proactive contribution strategies, she noted.
The 2022 Class Benchmark Report indicated that females consistently made more non-concessional contributions than males in the 2020 and 2021 financial years.
“This shows that women seeing the value of growing their balances in super regardless of the ability to claim a deduction,” she stated.
“There is also evidence that suggests there is a higher uptake by women of downsizer contributions.”
The importance of equalisation strategies
Ms Hurley also highlighted the benefits of using recontribution and balance equalisation strategies for couples.
These strategies, she said, can help both spouses to manage their total super balance and transfer balance cap.
She gave an example of a lopsided SMSF compared with a fund with equal balances for each spouse.
“The SMSF has a $3.4 million investment portfolio and generates a 5 per cent income, with no franking credits and foreign tax credits,” she explained.
In the lopsided SMSF, the husband has a $3.2 million balance and the wife only $200,000. The husband holds $1.7 million in retirement and $1.5 million in accumulation. This fund could be paying around $11,250 in tax, she noted.
However, in the balanced SMSF, where the husband and wife both have balances of $1.7 million, all in retirement phase, the fund could potentially pay no tax, she said.
