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Key strategies for equalising super

By Peter Kelly
November 30 2017
5 minute read
Key strategies for equalising super
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The introduction of concepts such as the total superannuation balance and transfer balance cap, mean it may be worth revisiting strategies for equalising superannuation between partners.

With the inclusion of superannuation benefits as divisible property for family law back in 2002, the objection to equalising superannuation benefits between partners is perhaps not as great as it once was in the last century.

But this article is not about splitting super following a relationship breakdown. It is more about sharing or allocating superannuation benefits between partners in a relationship - be they married, de-facto, or in a same-sex relationship.


With the introduction on 1 July 2017 of several provisions of the Treasury Laws Amendment (Fair and Sustainable Measures) Act 2016, concepts like ‘total superannuation balance’, ‘transfer balance cap’, and even the increased threshold for eligibility for the spouse contribution tax offset, created an opportunity to revisit the concept of equalising superannuation between partners.

I have a long-held view that equalising superannuation benefits between partners is a prudent strategy, however, my view was premised on the risk that the tax-free status of superannuation benefits – both income streams and lump sums – paid from a taxed superannuation fund to members over the age of 60 would not be sustainable for the longer term. At some point, these generous tax concessions that have been with us for 10 years would be clawed back.

Equalising superannuation between partners will deliver many benefits but, at the same time, there are risks to consider. Let’s look at some of the common strategies in detail.

Re-contribution strategy

The re-contribution strategy is perhaps one of the best known and most commonly used strategies today.

It is simple, and in the right circumstances can produce quick and effective outcomes.

A recontribution strategy involves one member withdrawing a portion of their accumulated benefit and recontributing it as a non-concessional contribution for their partner.

While a recontribution strategy previously involved making non-concessional contributions for a spouse, the removal of the 10 per cent test — which determines the eligibility to claim a tax deduction for personal superannuation contributions — has opened up the opportunity for the donor member to withdraw part of the accumulated benefit and gift it to their spouse who in turn, makes a personal tax-deductible contribution.

Naturally, the benefit of making personal deductible contributions will depend on the marginal tax rate of the individual making the contribution.

To be able to affect a recontribution, there are several important considerations:

  • Benefits withdrawn need to be unrestricted non-preserved benefits.
  • Withdrawn benefits will be taken proportionally from the member’s taxable and tax-free components.
  • If the member is under 60 years of age, tax may be payable on all or a portion of their taxable component withdrawn.
  • The member for whom the contribution is made must be eligible to make contributions. That is, they will need to be under 65 years of age, unless they can meet the work test, and their total superannuation balance must be less than $1.6 million if planning to make non-concessional contributions. Where the three-year bring forward rule has been triggered in the previous two financial years, caution will need to be exercised to ensure any additional contributions don’t result in a breach of the non-concessional contribution cap.
  • The new contributions will be preserved and are only accessible once the member has met a condition of release.

Benefits of utilising a recontribution strategy include:

  • Ensuring member’s benefits remain under their respective $1.6 million transfer balance cap.
  • Keeping an individual’s total superannuation balance under the relevant limit, thereby allowing an SMSF to continue to segregate specific assets to the pension phase.
  • Having a low income earning spouse make a non-concessional contribution may give entitlement to the government co-contribution.
  • Quarantining accumulation benefits in the name of a younger spouse to have the benefit exempt from the assets and income tests for Centrelink purposes.
  • Maximising a member’s tax-free component in the event they wish to commence drawing an income stream prior to age 60, and for estate planning purposes where a superannuation death benefit is likely to pass to a non-dependant beneficiary (for tax purposes).
  • A recontribution strategy may entitle a spouse making the contribution to the spouse contribution offset.

Spouse contribution tax offset

When an individual makes a non-concessional contribution for their spouse, they may be entitled to a tax offset of up to 18 per cent of the amount contributed, subject to a maximum offset of $540.

To be eligible for the maximum rate of spouse tax offset, a spouse for whom the contribution is made must have an assessable income + reportable fringe benefits + reportable employer superannuation contributions of less than $37,000. This is a significant increase over the $10,800 limit that applied before 1 July 2017. If income exceeds $37,000, the tax offset is scaled back and is not available once income exceeds $40,000.

As a spouse contribution is a non-concessional contribution, they can only be made if the receiving spouse has not exceeded their personal non-concessional contribution cap, and their total superannuation balance at the previous 30 June is less than the general transfer balance cap, currently $1.6 million.

Spouse contribution splitting

Superannuation laws allow an individual to transfer up to 85 per cent (up to 100 per cent in the case of constitutionally protected funds) of their recent concessional contributions to the superannuation account of their eligible spouse.

Generally, the splitting of contributions is limited to those concessional contributions made in the previous financial year. That is, in 2017/18 an individual may transfer up to 85 per cent of their concessional contributions made in 2016/17 to their spouse’s superannuation account.

To be eligible to receive split contributions, the receiving spouse must be under the age of 65 and they must not have met the retirement condition of release since reaching preservation age. Where a spouse receiving a split contribution has reached their preservation age (but is under 65), their superannuation fund may ask them to make a declaration to the effect they have not met the retirement condition of release.

Contributions subject to a contribution split are assessed against the original member’s concessional contribution cap, and not the cap of the spouse. Once spilt, they retain their character as taxable components and become a preserved benefit of the spouse for whom the contribution is made.


In the right circumstances, equalising superannuation benefits between partners in a relationship can represent a viable strategy. It enables couples to maximise the opportunity to manage their retirement nest egg in an extremely tax effective, albeit now a somewhat constrained, superannuation system.

By equalising benefits, a couple has access to a transfer balance cap of $1.6 million each, and by containing accumulated benefits to less than $1.6 million each, the opportunity to make future non-concessional contributions remains in place.

In the general scheme of things, it is not uncommon for couples to have disproportionate superannuation accounts, and if balances are modest, equalising super may not be as enticing. However, consideration to equalising superannuation benefits over time is a strategy that is often worth considering for many advisers’ client bases.

And by equalising super, if the government should decide at a future date to reintroduce tax on superannuation benefits, that will also be covered.

Peter Kelly, superannuation, SMSF and retirement planning specialist, Centrepoint Alliance