Kate Anderson

Insights from Class show downsizer contributions are on the rise, while underutilised strategies include super splitting.

Class operations general manager Kate Anderson tells Professional Planner downsizer contributions inside SMSFs have risen.

She points to the Class ‘2023 Annual Benchmark Report’, which shows the average downsizer contribution reached a new record high of $281,500 in the 2023 financial year.

“Our data at Class shows that the downsizer contributions statistic where people sell their homes and make a contribution [of up to $300,000] into super, has increased substantially over the last couple of years,” she says.

According to Anderson, another useful strategy where advisers can add value is superannuation contribution splitting. The measure, which came into effect in 2006, allows people to split up to 85 per cent of their before-tax contributions each financial year with their spouses.

Anderson says a lot of people don’t use this strategy, but it can help couples, especially if a spouse has taken time out of the workforce and there’s a significant difference in a couple’s super balances.

For example, if one is maximizing concessional contributions but is nearing his or her transfer balance cap, he or she can then split the 85 per cent into the other spouse’s account. The couple then has two transfer balance caps and two amounts towards retirement in that concessional tax environment.

Anderson adds that a recontribution strategy can be useful for estate planning purposes.

It involves a member withdrawing a super benefit and then re-contributing it back as a non-concessional contribution. The purpose of this strategy is to reduce tax paid on death, should the members’ super balance be paid as a death benefit to a non-dependent.

“If a client has a significant taxable component in their super, they can take that money out after age 60 tax-free and then put it back so that when they die, their children are going to receive all their inheritance from super tax-free rather than paying 15 per cent plus Medicare,” Anderson says.