23 – Superannuation spouse transfers
Women are under-superannuated. One reason is more breaks and less time in the workforce, which means less super contributions and lower super balances. We explore this phenomena in an article published in late 2015 in Professional Planner Suffragettes Need Superannuation.
To help counter this phenomena the government introduced spouse super transfer rules. These rules allow spouses to transfer their after tax super contributions/benefits to each other each year, the idea being couples can share their super benefits and this will reduce super gender imbalance.
(Originally the spouse super rules intended to counter the effect of reasonable benefits limits on married couples. RBLs are long gone, and we do not need to explain this any further.)
The super spouse transfer rules should be considered automatically for every client whenever there is an age difference between the partners.
If your client is in a permanent relationship it may make sense to transfer the after tax super contributions for the younger spouse to the older spouse. This effectively brings forward the tax free investment period (i.e. age 60) meaning less tax will be paid. It also brings and the various access points, reducing the disadvantage of the preservation rules.
Let’s assume John, age 50, is married to Joan, age 60, and pays $35,000 a year super. John can transfer the after tax amount (ie $35,000 less 15% tax) to Joan. If Joan then starts a transition to retirement pension John’s original super contributions are now being invested tax free. If Joan stops work John’s original super contributions can be accessed by Joan, even though John is only 50 and a long way off stopping work at age 65.
Obviously these rules work better the greater the age gap between the spouses. We know of one case where a fifty year old doctor was married to a 65 year old spouse. He transferred his contributions to her, less 15% tax, and she was able to invest them tax free under the super pension rules and access them at any time without stopping work because she was over age 64.
You can read an article on the www.superguide.com.au website dealing with spouse super transfers from a 41 year old partner to a 56 year old partner here: Can I split my super benefits with my spouse?