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Carry-forward contributions can enhance splitting strategies

By Miranda Brownlee
18 January 2023 — 1 minute read

A technical expert has highlighted that contributions made under the 5-year unused concessional contributions rule can be used for spouse contribution splits.

In a recent article, SMSF Alliance principal David Busoli explained that a spouse contribution enables members to relegate after-tax concessional contributions to an eligible spouse.

The spouse must be under preservation age, between preservation age and 65 and not retired or between 60 and 65 and has not terminated gainful employment after age 60, Mr Busoli noted.


The amount that can be split is 85 per cent of the previous year’s contribution based on the lesser of the amount of the concessional contribution made or the allowable cap in the year of contribution, he said.

“Interestingly, contributions made under the increased cap provided by the 5-year unused concessional contributions rule may also be split,” he stated.

In a recent CFS FirstTech podcast, Colonial First State senior technical manager Julie Fox explained that given that the carry forward rules actually increase a member’s concessional cap, members are able to split 85 per cent of that higher concessional contribution cap.

Ms Fox gave an example of a member with an unused concessional cap of $40,0000 due to the carry forward rules.

“They could split 85 per cent of the $40,000 which would be $34,000,” she said.

However, she stressed the importance of checking the rules of the fund when planning to use an unused carry forward amount.

“Different funds may apply different rules to the amount that you can split,” she cautioned. 

Mr Busoli also noted that as the split is treated as a rollover, it does not reduce the contributions originally made for the member for reporting and contribution caps purposes.

For higher balance members, Mr Busoli explained that splitting can result in an increased entitlement to make non-concessional contributions by lowering their total super balance to under any of the three non-concessional cap pivot points.

“For lower balance members, it may provide access to the 5-year unused concessional contribution entitlement by keeping, or lowering, their total super balance to below the $500k threshold.”

Mr Busoli reminded SMSF professionals that the split can generally only occur in the year following the year of contribution.

“This means that its effect on each member’s future contribution entitlements is delayed as a concessional contribution made in the 2022 year is not split until the 2023 year so the lowering of the total super balance does not have an effect until the 2024 year, based on the total super balance at the end of the 2023 year.”


Carry-forward contributions can enhance splitting strategies
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Miranda Brownlee

Miranda Brownlee

Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: miranda.brownlee@momentummedia.com.au

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