spouse split of super balance

I have a sizeable super balance and my wife has basically none. Whilst I appreciate that the current super laws don't include any reasonable benefit limits etc, I don't trust future governments to not reintroduce something similar. (I am only 41 so have at least 24 years to wait!)

Is there any way I can move 50% of my super balance to my wife's name?

 

Super splitting of concessional (deductible) contributions is available for 85% of the contributions. So if max contributions of $25000 were made this year. then 21250 could be split. Talk with the trustee (manager) of the fund.

If you were older you could have used a recontribution strategy but alas you are not (old).

 

am I right that what you desribe only helps me on a look forward basis (futuire concessional contributions) - ie nothing can be done about what is already in my super account?

 

That's certainly my understanding.

 

You can't split what is already in there.

There is something called minimum benefits that must be preserved. The minimum benefits are the sum total of you contributions plus your share of investment income less taxed applied to your member balance.

The big question is WHY DO YOU WANT TO DO IT???

There are no longer RBL limits - so you can have as much as you want.

How old is your wife? You should try to have the maximum amount in the persons name who is going to be able to access sooner (i.e. the oldest).

Also you can access up to 10% of your account balance per year once you hit 55 so you actually have only 14 years to wait rather than 24.

It is not unusual for a husband to have more money in super - this is because women take time off work to have kids and may only work part time.

I don't see it as a drama.

If you are really keen on splitting some into your wife's name you can get a divorce. I am sure the family law court will allow the split if you request it!
I am joking obviously

If you are a couple of years older than your wife she should do a split to you every year! This will be more beneficial when you hit 55 if you want to commence a TRIP/TRIS (transition to retirement income stream) and salary sacrifice.

Of course if the next 10 to 15 years have as much change to the super laws as the last 10 years - who knows what will change and what new strategies will be about when you hit retirement age. You will go crazy trying to second guess the government.

I am really interested in hearing your thinking behind why you want to split some to your wife. Maybe we can help you out another way or debunk some myths about this mysterious beast called superannuation.

SM
Sunday Musings
SuperMan

 

The oldest is not always the person who can access it first, eg, in a couple, person A may be 59 and working full time whereas person B may be 55 and permanently retired. Person B could make a lump sum withdrawal whereas person A could only start an income stream.

10% is based on the assumption of working, not with someone who is permanently retired.

Only reason I can think of is the first $150,000 is tax free lump sum threshold for those between the ages of 55 and 59 (Threshold for 2009/2010 is $150,000, which is indexed to Average Weekly Ordinary Times Earnings in $5,000 amounts). With a couple the maximum amount would be $300,000.

Cheers,

Dan

PS This is general information and does not take into account anyone's situation. Before making a superannuation decision speak to your FPA registered Financial Planner.

 

Thanks for clarifying my examples Dan.

Your input has increased the value of the response and put a different spin on it.

I suppose a lot of advisers (myself included) are guilty of focussing too much on how to get money into super rather than get it out!

As super is such an awesome vehicle for tax savings and asset protection, and there is a lot of flexibility if used correctly, in most cases people are better off keeping money in super rather than drawing it all out as soon as possible and sticking it in their personal bank account or term deposit.

That is the old school way of thinking.

There is nothing wrong with pulling it out and dropping it back in as 100% non-concession (undeducted) contributions to make the members interest 100% tax free when they die however.

One argument I have heard is that people pull a lot of money out and poor the funds into property improvements on their residence to make them eligible for the Centrelink Age Pension. This is also old school and there are ways of getting the best of both worlds.

Be careful with the full retirement at age 55. It means what it means - you are FULLY RETIRED and if you go back to work questions will be asked!

Anyway - hopefully Mr try anything once gives us some more insight into his thinking and his situation.

SM

 

thank you both for your posts.

the short answer as to why I want to split my super into my wife's name is that I just don't trust the government not to reintroduce either the RBL or something the equivalent of it over the next 20+ years.

We all know that we have a big problem with the aging population with not enough people able to support themselves in their retirement years. Compounding this is the fact that we will have relatively fewer taxpayers footing the bill for government funded aged support.

As you have said, there have been so many changes in Super laws over the past 10 years I think it is inevitable that changes will continue. And hitting those with an "excessive" super balance is an easy way out to fund any shortfalls elsewhere. May not be in the form of an RBL, but could be (for example) the equivalent of a progressive tax scale on distributions from the Superfund?

Maybe I am just a suspicious b*st*rd! I see this as a form of insurance against future law changes. It may not eventuate, but if there are changes, I think it is very unlikely that we would be worse off with the super balance split between two of us.

My wife is only 9 months younger than I am so no real motivation there to access super earlier.

 

I understand.

The only constant is change. You WILL go crazy trying to second guess Government policy decisions.

The big picture however is that the Government wants us all to be self-funded at retirement - with the aging population the country won't be able to afford to pay everyone an age pension. I am quite OK with the fact that when I retire there will be no age pension (just my expectation).

At least they typically don't make changes apply retrospectively or they put in grandfathering provisions - so provided you are doing the right thing now you should be OK long term.

Also remember there are a lot of smart people who the Government is getting input via consultations / submissions with any changes they make - so believe it or not there are a lot of people looking out for us, working hard and prodding the Government policy makers in the right direction.

Every time something changes it normally just creates new strategies and opportunities.

If it is really a concern when you hit retirement you have the option of pulling it out and re-contributing on a more even basis between you and your wife. Doing so could also have positive estate planning consequences also.

Of course get advice before doing anything.

The best way to ensure you will be financially OK long term and NOT be vulnerable to the whims of Government policy makers using super as a trillion dollar political football is to educate yourself and stay a head of the pack.

Enough ranting from me!

SM

 

thanks SM

Just had a thought - can residential property be "transfered" into super?

you may have seen my earlier post where my wife's parents are in a bit of a bind and needed $150k. They offered to transfer their $300k property into our name in return for $150k up front plus them retaining a life tenancy in the property (ie they live there till they die).

Is there any way that the property could be transferred to my wife's super?

 

I would think not on a couple of fronts....
1. Except for a few exceptions you can't buy from yourselves or associates - residential property is not one of the exceptions.
2. The sole purpose test. The sole purpose of the fund is to provide for the retirement of its members. Investments are to be made with this in mind - so you'd fail this one.

 

Matt

I wasn't thinking about her super fund "buying" the house - the fund has no money in it to buy anything!! I was thinking more along the lines of it being "contributed" to the fund - can non business real assets be contributed, or just cash?

As for the sole purpose test, "providing for the retirement of its members" is exactly the reason why I want to put it into the super fund - its "investment horizon" is a good match for super (ie 20-30 years).

I realise the answer is answer is still probably no, but intuitively it fits with Super's stated purpose (long term wealth creation).

 

MattR is right.

Unfortunately a residential property cannot be contributed 'in-specie' into an SMSF.

Property in general is a solid long term investment and a SMSF is the ideal vehicle to hold it for long term wealth creation. However the current super regulations are very clear.

If the in-laws are basically looking at selling you their place for half price, and just retaining a life tenancy, that might be the way to go. You will get all the capital growth, but I would ensure that there is going to be no other issues with other family members getting upset.

I would also lock them into paying all the rates etc - however if you need to borrow to purchase the place from them the interest will not be deductible unless there is some rental income.

It is a tricky one!

Maybe the Cooper review may lead to changes to enable residential properties to be acquired from members of a SMSF or a related party (like you can for business real property) - but don't hold your breath.

SM

 

thanks SM and MattR.