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This month, Emma Partenza answers a great question about maximising the benefits of combined superannuation.
My wife and I have a Self Managed Superannuation Fund. My wife, Joan is 63, has a super balance of $1,935,000 and is still working but recently ceased one of her part-time jobs to gradually move into retirement. I am 68, have a balance of $1,068,000 and retired several years ago. What can we do to ensure we maximise the benefits of our combined superannuation?
From 1 July 2022, the following changes to the superannuation rules will provide you with a greater opportunity to implement re-contribution strategies to maximise your superannuation benefits between yourselves:
- Members over the age of 67 no longer need to meet the work test – creating greater potential to make non-concessional contributions to even up balances.
- Members with Total Super Balances less than $1,700,000 will be entitled to bring-forward up to 3 years non-concessional contributions until the age of 75 (including those made just prior to their 75th birthday).
You have the following superannuation benefits:
In your situation, these rules can be applied as follows.
Joan is still working but as she recently ceased one of her jobs, she has access to her unrestricted non-preserved (URNP) benefits of her superannuation benefit. Considering this, and her transfer balance cap (TBC) of $1,700,000, she will maximise the amount of benefits she can put into a retirement phase income stream. A portion will be required to remain in accumulation, paying tax on earnings at 15%.
With your super balance at $1,068,000, you have not maximised your transfer balance cap and will have an indexed TBC of an amount between $1,600,000 and $1,700,000.
One strategy you should consider is withdrawing benefits from Joan’s accumulation interest and re-contributing them into your super. Prior to 30 June 2022, you must have first satisfied the work test and did not have access to the bring forward non-concessional contributions cap. This has been removed from 1 July 2022, thus providing greater strategy opportunities
By implementing this strategy from 1 July 2022, Joan is reducing her total superannuation balance by $330,000, thereby creating the opportunity for her to potentially make non-concessional contributions in the future, and you can commence a retirement phase income stream on the re-contributed (non-concessional contribution of up to $330,000) amount within your TBC.
The amount attributed towards your TBC will then be $1,230,000.
Joan should consider moving her benefits into the retirement phase. After implementation of this strategy a greater amount of her benefits will be within her TBC earning tax exempt earnings. This strategy not only achieves the above benefits for you both to maximise pensions, but Joan is also converting a portion of her benefits (up to $330,000) that are currently 18% tax free into 100% tax free monies, thereby saving death benefits tax on death of the surviving spouse when paid out of the SMSF to beneficiaries of approximately $46,000.
Any questions?
If you have any questions about your superannuation, please contact us on 03 9886 0800 or via email.
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Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.