Superannuation and women’s finances are hot topics this year, especially with a federal election campaign underway. We’ve been drowned in statistics about how poor our financial outlook is – apparently the pot of gold waiting for us at retirement is more likely to be a few M&Ms in the bottom of a plastic bucket. The problem is building a better super balance costs money. Or does it?
Well not always. There’s a strategy that switched on couples use that keeps both people’s super balance growing, as well keeping each person equally empowered to participate in the key financial decisions – and it doesn’t cost a cent.
Wealthy people love it because it helps them to create a more tax effective set up for retirement. By splitting their super evenly they are more likely to stay under thresholds where additional taxes may be levied.
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It’s particularly valuable when one member of the couple has a lower income than the other person. If that sounds suspiciously like your household read on.
Women’s super usually stops growing during times of low paid, or unpaid, work and the longer the lull in contributions the harder it is to catch up later. Your partner can help your superannuation to grow by splitting (or transferring) part of their employer super contributions over to your super account. Because you and your partner can do this just by using the standard 9.5% superannuation guarantee contribution there is no extra squeeze to household cash flow. If your spouse is putting extra into their super account via salary sacrifice that amount is also able to be split.
This great initiative is called superannuation spouse contribution splitting. Apart from the ridiculously long name it is a fantastic way to keep your super account growing because it doesn’t impact on your take home pay. Best of all it can really help both partners to feel like they are keeping an equal footing and working as a team over the finances.
Now is a good time to take a look at this. If your partner get the application form to their super fund before 30 June 2016 contributions made in the 2014-15 financial year can be transferred to your super account. And from 1 July 2016 your partner can then re-apply to request contributions made in 2015-16 are also transferred over to your super account. So you can get some real bang for your effort.
It won’t make sense for everyone. For example; if you are a lot younger than your partner. Talking to an advisor can be helpful and you can also check out some of the fact sheets about this strategy on your super funds website along with the applications forms.
You can check out the ATO website and my other articles on this issue here.
Nerida Cole is the Managing Director of Dixon Advisory and a superannuation expert.
Why do you think women, on average, have less superannuation than men?