Case Study: Mark and Rachel and contribution splitting

The Situation for Mark and Rachel

Mark and Rachel were a couple in their early 30s and Rachel had recently started a florist business. Rachel had previously worked as a florist and Mark was employed as a diesel mechanic. After a couple of years, the business had made some profit, but any additional funds went into the business. They were concerned that they were not saving for retirement but unsure what to do. They had a basic understanding of superannuation: Mark’s employer was contributing to his fund and Rachel had previously received contributions as an employee in a florist business. However, Rachel as a business owner was putting nothing into her superannuation.

The ASC Solution

We suggested that Rachel puts about $50 a week into superannuation as concessional contributions which wouldn’t affect their cash requirements but would help boost her superannuation. As Mark was earning over $130,000 annually and Rachel’s taxable income was only about $7,500, Bentleys suggested that Mark make a spousal contribution of $3,000, which would deliver Mark a tax offset of $540. As Rachel has taxable income of less than $36,021 (2016/17) she was able to receive $500 co-contribution from the government as well.

Another way Mark could even up their superannuation balances, especially given $1.6million cap, would be to use contribution splitting of his employer contributions into Rachel’s super. This would help ensure their retirement tax free pension caps were maximised.


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