The notice to claim the contributions as a tax deduction will make the contributions taxable in the super fund and hence splittable.
How a member asks for contribution splitting
A member must apply in writing to have their contributions split.
The ATO have developed a form for this purpose. It is known as NAT 15237.
Trustee must act within certain time frame
A trustee who does not reject a contribution splitting application must action it within 90 days of receiving it.
What can happen to the split contributions?
The split contributions can be rolled over or transferred to another fund, or the trustee performing the split can create a member’s interest for the receiving spouse.
Split contributions must be preserved (unless the trustee is satisfied that the receiving spouse satisfies a relevant preservation condition of release, such as death, permanent disability, retirement, et cetera).
Split contributions are taxable component
Because the split contributions can only be taxable contributions, they will transfer as part of the receiving spouse’s taxable component.
Correspondence with ATO
When the contribution splitting rules were first introduced, they required that the ATO be given “a statement setting out the matters required by the regulations”.
The information required has never been specified.
Example
Jim James is aged 62 and has $350,000 in his super fund. He has a salary of $90,000 per annum. His total employer contributions of Super Guarantee and salary sacrifice will be $50,000 this financial year. In July 2011 he completes an ATO super splitting application form (NAT 15237) and splits $42,500 (85 per cent of $50,000) with his spouse, who has minimal super.
As a result, Jim keeps his super balance below $500,000 and his spouse receives some super benefits. He has also potentially retained access to the higher concessional contribution cap for one or more years.
As noted, contribution splitting may not be a valid solution to enabling access to 50, 50, 500. Nevertheless, it’s still worth giving some thought to.
Tony Negline is general manager, corporate strategy at SUPERCentral – www.supercentral.com.au. He is also the author of “A How to Book of Self Managed Superannuation Funds”. Details about the book are available at www.atcbiz.com.au/smsfstore.php
