Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 322

All’s fair in love and super: why couples should equalise super

It is common for couples to have very different super balances. If one partner has taken time out to care for children, undertake casual work, or work part-time, the disparity can be pronounced. Super balances will also vary depending on the individual’s age and salary.

But changes implemented by super reforms since 1 July 2017 have brought greater incentives for spouses to consider equalising their superannuation balances, including tax and estate planning benefits.

Some of the major changes

The transfer balance cap limits the total amount of superannuation that can be transferred from the accumulation phase to the tax-free retirement phase.

This cap starts at $1.6 million per individual. Any excess transfer balance amount must be removed from the retirement phase and will be subject to tax. Equalising super between spouses can therefore maximise the amount that can be invested in the tax-free retirement phase and the amount that can be kept in the tax-friendly super environment if one spouse were to die.

In addition, from July 2018, individuals with a total super balance less than $500,000 are allowed to carry forward unused concessional contributions (ie pre-tax super contributions) and ‘catch them up’ in later years.

This rule also creates an argument for equalising super between spouses, so both can potentially use the catch-up concessional contribution measure to maximize their retirement savings.

How to equalise super between spouses

A number of strategies can be used to equalise super balances between spouses, including regular spouse contributions, contributions splitting and recontribution strategy.

If a member’s income is below $37,000, their spouse may receive a tax offset of up to $540 if they make a spouse contribution of up to $3,000 to their spouse’s super each year. If the receiving spouse’s income exceeds $37,000, the amount of the tax offset available starts phasing out and cuts out completely at $40,000.

Couples can also consider contributions splitting, which allows one member of a couple to roll over up to 85% of their concessional contributions made in a year to their spouse.

Another option for couples who have reached age 60 is a recontribution strategy. This involves withdrawing some super benefits from the account of the spouse with a higher balance, by starting a transition to retirement income stream or making a lump sum withdrawal (if a condition of release is met) and recontributing to the spouse’s super account.

These withdrawn funds can then be contributed to the spouse’s account either via a spouse contribution or a personal contribution (ie the spouse making a member contribution for themselves).

Either way, the contribution counts towards the receiving spouse’s non-concessional contribution cap, which is $100,000 per year, or if the receiving spouse is under 65, the bring-forward cap of up to $300,000 may be available.

These strategies can be a useful way for couples to maximise the amount that can be held tax-free at retirement, which is $3.2 million in total. For members in the accumulation phase with a total super balance of less than $500,000, they can also help both members of a couple qualify to make catch-up concessional contributions to maximise their super savings in the lead to retirement.

The recontribution strategy can also be useful for estate planning purposes, as it potentially reduces the tax payable from death benefit proceeds. It may boost an older spouse’s amount of age pension if the older spouse is the person with the higher balance where the younger spouse is under their qualifying age pension age and their super accumulation accounts are not assessed for social security purposes.

Other considerations

The new catch-up rule for concessional contributions will also increase the flexibility of salary sacrifice arrangements.

For example, if Anne receives $5,000 in employer superannuation contributions and does not make any additional pre-tax contributions, she will have $20,000 of unused concessional contributions left in the 2018-19 tax year. This can then be carried forward for up to five years.

For Australians who have been funneling income into other areas, like a mortgage, kids’ education, or paying off personal debt, this new rule provides a welcome way to add more to super when they can afford to.

If both partners have low super balances, for example if both are self-employed, low income earners or recent immigrants to Australia, there may be no need to split contributions. But there are still strategies available to help with maximising super.

Those with income below $38,564 may consider taking advantage of the government co-contribution of up to $500 by making an after-tax member contribution of $1,000 if eligible. The cut-off threshold is $53,564. To qualify, the member must be under 71 and have personal exertion income (such as a salary) of over 10% of their total income.

The increase in the spouse income threshold from $10,800 to $37,000 for spouse contribution tax offset purposes also provides greater incentive for partners to make super contributions on behalf of a low-income spouse. The contributing spouse can potentially claim a tax offset up to $540 per year by making super contributions on behalf of a low-income partner.

Concluding observations

Members of a couple equalising their super balances can bring tax benefits, help with estate planning and boost the retirement nest egg of a partner with minimal retirement savings.

While couples may be concerned about the impact of equalising super in the event of divorce, as super is considered a divisible asset under Australian Family Law, there should be little impact.

There are, however, other risks to consider, such as ensuring no caps are breached and that members meet the conditions required for each strategy.

Given the number of potential strategies on offer and the complexity of some of these, we recommend that anyone who is considering ways to boost their super should seek financial advice.

 

Craig Day is an Executive Manager at Colonial First State. This article is for general information only and readers should seek professional advice on their personal circumstances before taking action.

 

3 Comments
Michael
September 07, 2019

Another consideration may be whether or not the couple wish to take out an annuity in retirement, as the older person (or the male, if applicable, if both persons are the same age) will get a greater annual annuity payment for the same purchase price. If the age difference is significant then this complicates the decision. And the health of each person is also a consideration. Too complicated for me to comment further on - I agree, seek financial advice in such circumstances.

mike west
September 12, 2019

They also may not wish to buy an Annuity given the interest rates are almost the lowest in history .

 

Leave a Comment:

RELATED ARTICLES

The quirks of retirement planning with an age gap

Investment bonds should be considered for retirement planning

How SMSF contribution reserving can use the higher caps

banner

Most viewed in recent weeks

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Latest Updates

Investment strategies

Why I dislike dividend stocks

If you need income then buying dividend stocks makes perfect sense. But if you don’t then it makes little sense because it’s likely to limit building real wealth. Here’s what you should do instead.

Superannuation

Meg on SMSFs: Indexation of Division 296 tax isn't enough

Labor is reviewing the $3 million super tax's most contentious aspects: lack of indexation and the tax on unrealised gains. Those fighting for change shouldn’t just settle for indexation of the threshold.

Shares

Will ASX dividends rise over the next 12 months?

Market forecasts for ASX dividend yields are at a 30-year low amid fears about the economy and the capacity for banks and resource companies to pay higher dividends. This pessimism seems overdone.

Shares

Expensive market valuations may make sense

World share markets seem toppy at first glance, though digging deeper reveals important nuances. While the top 2% of stocks are pricey, they're also growing faster, and the remaining 98% are inexpensive versus history.

Fixed interest

The end of the strong US dollar cycle

The US dollar’s overvaluation, weaker fundamentals, and crowded positioning point to further downside. Diversifying into non-US equities and emerging market debt may offer opportunities for global investors.

Investment strategies

Today’s case for floating rate notes

Market volatility and uncertainty in 2025 prompt the need for a diversified portfolio. Floating Rate Notes offer stability, income, and protection against interest rate risks, making them a valuable investment option.

Strategy

Breaking down recent footy finals by the numbers

In a first, 2025 saw AFL and NRL minor premiers both go out in straight sets. AFL data suggests the pre-finals bye is weakening the stranglehold of top-4 sides more than ever before.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.