Splitting money is awkward. Whether it’s going Dutch at a restaurant, sharing the cost of fuel on a road trip or going ‘halfies’ at the supermarket — it can be uncomfortable.
The leading reason women retire with 35% less super than men is down to the long stretches of time women spend out of the workforce. In Australia, women make up almost 70% of the part-time workforce and over 95% of stay at home parents are women.
There are lots of elements holding women back from participating in the workforce at meaningful levels. But women shouldn’t be financially penalised for raising children, caring for elderly parents, or running a busy household. It’s uh… vital work.
So, if you’ve got your toe in the workforce while your partner has both feet firmly stuck into theirs — what could you be doing to ensure superannuation equality in your relationship?
Sucks to add this to your mental load team, but it’s helpful, promise. If you’re out of the workforce, there are a couple of ways your partner could contribute to your superannuation. The first is called ‘contribution splitting’ where before tax contributions, like superannuation payments made by your partner’s employer, are directly transferred from your partner’s super account into yours. Your partner is essentially splitting their super with you. The second way to share super is by making a ‘spousal contribution’, which is where your partner makes a personal after-tax contribution to your super account.
Sharing super — What you want to know
There are a few benefits of sharing superannuation within a relationship. It’s not only an effective way of reducing the superannuation shortfall women suffer, it’ll also make you less reliant on your partner’s income in retirement. Plus, there can be tax benefits too.
It may feel uncomfortable to chat with your partner about this, and why have it all if you’re not planning on divorce? But it’s a way to achieve equality today, build your super independently and capitalise on compound interest.
What you need to know
You don’t need to be married to split contributions, but you need to either be registered as a couple in your State or Territory or considered de facto.
The partner splitting the contribution needs to complete a contribution splitting form and submit it to their superannuation fund.
The maximum amount that the partner splitting their contributions can split is the lesser of:
- 85% of their concessional (before tax) contributions for the financial year; or
- $27,500, which is the concessional contributions cap for one financial year.
If you’d like more information on what concessional contributions and contribution caps mean, and how they might apply to you, we’ve written about it here.
You can only make an application to split contributions once per financial year.
The contributions to be split must have been made during the previous financial year. So if your partner makes an application during the 2021–22 financial year, the super contributions to be split must have been made between 1 July 2020 and 30 June 2021.
Some super funds don’t offer contribution splitting, so check with your partner’s super fund to confirm they will allow it.
The partner receiving the contributions must be either aged less than their preservation age (the age you can access your super) or aged between their preservation age and age 65 and not permanently retired. The age of the person splitting their super isn’t relevant.
If every couple in Australia sits down with their partner tonight to chat about sharing superannuation, we’d have a much fairer system. It may feel awkward, or you may be with a progressive supportive partner who’s totally up for it. But as Esther Perel might say, why not have a chat about it?
The low-income super tax offset (LISTO) is a payment of up to $500 the government pays into your super account to help low-income earners. And if you make $37,000 or less each year you might be eligible.
It’s normally paid directly into your super fund and you don’t need to do anything to receive it! You just need to make sure your super fund has your tax file number (TFN) — without it, your super fund can’t accept a LISTO payment.
If you’re keen to calculate your LISTO, you can use the ATO’s calculator, but basically it’s 15% of the concessional (before tax) super contributions you or your employer pays into your super fund.
Also, if you earn less than $56,112 p.a. (before tax) you might be eligible for a super co-contribution from the government. Co-contributions are a way to boost your retirement savings if you’re a low or middle income earner. The way it works is, if you make a personal (after tax) contribution into your super, the government may also make a co-contribution, up to a maximum of $500.
Great part of that story is, you don’t actually need to do anything (except make that personal, after tax contribution into your super). When you lodge your tax return, the ATO’s nifty enough to work out if you’re eligible. So long as your super fund has your TFN, the ATO will pay the co-contribution directly into your super account.