Spouse Super Splitting: Balancing the Two Balances

01 How contribution splitting works

Contribution splitting lets you transfer up to 85% of a financial year's concessional contributions to your spouse's super fund. You apply after the year ends — typically in the following financial year — using a form from your fund. The 85% reflects that concessional contributions are taxed 15% on the way in; the after-tax amount is what's available to move. Only concessional (before-tax) contributions can be split — employer SG, salary sacrifice, and personal deductible contributions — not after-tax non-concessional ones.

Splitting is frequently presented as a way for a couple to contribute more between them, and it is not. The contribution still counts against the contributing spouse's cap in the year it was made; what moves is the money and its future earnings, not the cap usage. A couple hoping to double their concessional room this way will find they have not.

On the defaults above, the worked example shows: You can split up to 85% of last year's concessional contributions — $21,250 — into your spouse's super, capped at the concessional cap.

Source: ATO — Contributions splitting

02 Two transfer balance caps are better than one

The biggest reason to balance two super accounts is the transfer balance cap — the limit, currently $1.9 million each, on how much a person can move into a tax-free retirement pension. It is a per-person cap and it cannot be shared.

A couple with $2.4 million split evenly can have all of it in tax-free pension phase. The same $2.4 million sitting mostly in one partner's account wastes part of the other's cap and strands the excess in accumulation, where earnings are taxed at 15% for the rest of their lives.

The arithmetic is worth doing once. On a $500,000 excess left in accumulation earning 6%, the 15% tax on earnings costs about $4,500 a year — every year, indefinitely, and rising as the balance grows. Splitting contributions of $20,000 a year for a decade moves $200,000 across at no cost beyond a form, which is why this is treated as routine housekeeping for couples rather than a strategy for large estates.

The catch is that it only moves contributions, not existing balance. A couple who arrive at retirement with $2 million in one name and $200,000 in the other cannot fix it by splitting; they can only have avoided it. That makes this a decision for people in their forties and fifties, not their sixties.

Source: ATO — Transfer balance cap

03 Bridging an age gap

If one partner is older, splitting contributions toward them brings more of the couple's super within reach sooner, because they reach preservation age first. For a couple with a five- or six-year age gap and a plan to stop work together, that can be the difference between having accessible money at the point they stop and having to bridge the gap from outside super.

The direction reverses if the goal is the Age Pension rather than access. Super held by someone under Age Pension age is not counted in their partner's assets test until they reach that age, so splitting toward a younger spouse can shelter a substantial sum from the means test for as long as the age gap lasts. A couple where one partner is 67 and the other 60 has seven years of that treatment available.

Those two aims genuinely conflict, and the right direction depends on which one is binding. If the couple will be comfortably above the assets cut-off either way, split toward the older partner for access. If a part pension is realistically in play, split toward the younger one and accept the money is locked up longer. Splitting the same contributions in both directions across different years is possible but usually just cancels out.

Source: ATO — Contributions splitting

04 Age Pension and tax positioning

Worth putting a number on that. The assets taper cuts the payment by $3 a fortnight for every $1,000 of assessable assets above the threshold — about $78 a year per $1,000. A couple holding $200,000 in the younger partner's name, outside the test until they reach Age Pension age, are keeping roughly $15,600 a year of entitlement that would otherwise have tapered away, for as long as the gap lasts. That assumes they sit in the taper zone to begin with; a couple above the cut-off either way gets nothing from it.

Two balanced balances also each draw tax-free pension income after 60 and each use a separate set of personal tax thresholds on any income that remains taxable. For a couple with meaningful assessable income outside super, that second point alone can be worth more than the splitting itself.

None of this is aggressive tax planning. It is using two people's caps, thresholds and means-test positions instead of crowding a household's retirement into one person's name — which is usually an accident of who earned more, not a decision anyone made. The related move for a low-earning partner is the super co-contribution, which rewards their own contribution rather than yours.

Source: Services Australia — Assets test for Age Pension

05 Who it suits and the limits

Splitting suits couples with unequal balances, an age gap, or a combined balance large enough that one transfer balance cap will not hold it. It is a gradual rebalancing, so it rewards starting early and does very little started late.

The limits are specific. Only concessional contributions can be split — employer Super Guarantee, salary sacrifice and personal deductible contributions — not after-tax non-concessional ones. The receiving spouse must be under 65, or under preservation age and not retired. And you apply after the financial year ends, using a form from the contributing partner's fund, for contributions made in the year just finished; most funds accept the application at any point in the following year, but only for that one year.

One thing splitting does not do, which is regularly misunderstood: it does not reduce the contributing spouse's contribution caps or free up cap space. The contribution still counts against their cap in the year it was made. Splitting moves the money and the future earnings on it; it does not move the cap usage, so it is not a way to contribute more than $30,000 a year between two people from one income.

Source: ATO — Contributions splitting