BY WEALTH ADVISER
Superannuation is a household asset that sits in individual accounts. That mismatch — between how families live and how super is structured — creates both a planning challenge and a planning opportunity.
In most Australian couples, one partner ends up with a significantly larger super balance than the other. The reasons are familiar: different earnings levels, time spent out of the workforce for caring, part-time work during the school years, career changes that reset the clock. None of this is unusual, and none of it represents a failure of the system. Super reflects lifetime earnings, and in households where one partner earns more or works more continuously, the balances will diverge.
The question worth asking is not why the gap exists, but what — if anything — couples should do about it. The answer, for many households, is that two reasonably balanced super accounts produce a better combined outcome in retirement than one large account and one small one. Not always, and not in every situation — but often enough that it deserves a conversation.
Why balance matters
The benefits of more equal super balances across a couple are practical, not ideological. They fall into four categories.
The first is tax efficiency in retirement. Each person has their own transfer balance cap — the limit on how much can be moved into a tax-free retirement pension account (currently $2 million, rising to $2.1 million from 1 July 2026). Two people with $1 million each can both move their entire balance into pension phase, where earnings are taxfree. One person with $2 million can do the same — but if that balance grows beyond the cap, the excess must remain in accumulation, where earnings are taxed at 15 per cent. A couple with two balanced accounts has more combined room to grow before either partner hits the cap.
The second is flexibility. Retirement is not a single event for most couples — one partner may retire earlier, or one may need to draw on super for health costs or aged care while the other continues working. Two funded accounts provide more options than one account carrying the full load.
The third is protection. If the relationship ends, super is taken into account in property settlements, but the process is simpler and the outcomes are often more predictable when both partners have meaningful balances rather than one partner holding everything.
The fourth — depending on each partner’s age and how benefits are structured — is the potential effect on Centrelink means testing. The way super interacts with the Age Pension assets test differs depending on whether a person has reached Age Pension age and whether their super is in accumulation or pension phase. For some couples, the way balances are distributed between partners can affect their combined Age Pension entitlement. This interaction is covered in detail in the Centrelink means tests article in this series.
The tools available
The superannuation system provides several mechanisms for couples to build more balanced accounts. Each works differently and suits different circumstances.
Contribution splitting allows you to transfer up to 85 per cent of your concessional contributions from the current or previous financial year into your spouse’s super account. The money has already been contributed and taxed at 15 per cent in your fund — splitting it moves it across without additional tax. Your spouse must be under preservation age (currently 60), or between preservation age and 65 and not retired, to receive split contributions. Splitting does not generate a tax deduction or offset for the contributing partner. Its value is structural: it redirects super that has already been contributed, gradually building the lower-balance partner’s account over time.
Spouse contributions are a separate mechanism. Here, the higher-earning partner makes a non-concessional (after-tax) contribution directly into the lower-earning partner’s super fund. If the receiving spouse’s total income is below $37,000, the contributing partner can claim a tax offset of up to $540 (18 per cent of up to $3,000 in contributions). The offset phases out between $37,000 and $40,000 of the receiving spouse’s income. The contribution counts toward the receiving spouse’s non-concessional cap ($120,000 for 2025–26), and the receiving spouse’s total super balance must have been below $2 million on 30 June 2025.
The government co-contribution is worth considering for the lower-earning partner if their total income is below $62,488 for 2025–26. A personal after-tax contribution of $1,000 (without claiming a tax deduction) can attract a government contribution of up to $500 — a guaranteed 50 per cent return. The co-contribution is available to anyone under 71 who earns at least 10 per cent of their income from employment or business.
Parental leave super, which now applies for children born or adopted from 1 July 2025, adds another element. The ATO pays a super contribution equal to 12 per cent of government-funded Parental Leave Pay directly into the recipient’s fund as a lump sum after the end of the financial year. For a parent taking the full leave entitlement, this amounts to a few thousand dollars — a modest contribution, but one that did not exist before.
When to use which strategy
The right combination depends on each couple’s circumstances, but some general patterns hold.
Contribution splitting tends to be most valuable for couples where both partners are still working and the higher earner is making concessional contributions well above what the lower earner receives. It costs nothing beyond the paperwork — no additional money leaves the household — and its effect compounds over years. A couple that consistently splits contributions over a decade can shift a meaningful amount of super from one account to the other without any cash outlay.
Spouse contributions are more useful when one partner has little or no income — for example, during a career break for caring, study, or illness. The tax offset is small ($540 at most), but the contribution itself may be the only way super is being added to that partner’s account during the break. Combined with the new parental leave super contribution for parents on government-funded leave, a career break no longer has to mean a complete pause in super accumulation.
The co-contribution is specifically useful for lower-income partners who are earning some employment income. If one partner works part-time and earns below $47,488, a $1,000 after-tax contribution to their own super triggers the full $500 government match — an immediate 50 per cent return that no other investment can replicate.
These strategies are not mutually exclusive. A couple could split the higher earner’s concessional contributions, make a spouse contribution during a year when the lower earner is not working, and ensure the lower earner makes a small personal contribution in years when they are working to capture the co-contribution. The key is that someone is actively thinking about both accounts, not just one.
Practical considerations
A few things to keep in mind when putting these strategies into practice.
Contribution splitting has a timing requirement. In most cases, you apply to split contributions from the previous financial year. You can apply to split contributions from the current financial year only in limited circumstances, such as before rolling over or withdrawing your entire super benefit. Most funds have a form for this — it is not automatic, and you need to request it.
Spouse contributions are after-tax money from the contributing partner, so they need to be funded from savings or take-home pay. The tax offset partly compensates for this, but only up to $540. Spouse contributions and personal contributions (including those that trigger the co-contribution) count toward the receiving partner’s relevant contribution caps, so it is essential to track the lower-balance partner’s concessional and non-concessional positions across all sources to avoid exceeding a cap and triggering penalty tax. By contrast, a contribution split is treated as a rollover to the spouse, not a new contribution — it does not use up the receiving partner’s cap space.
If the lower-earning partner is under 67 and not working, they can still receive spouse contributions and make personal contributions (up to their non-concessional cap) without meeting a work test. If they are 67 to 74, they need to satisfy the work test (40 hours of gainful employment in a consecutive 30-day period in the financial year) to make personal contributions for which they intend to claim a deduction, though non-deductible contributions and spouse contributions are not subject to the work test.
For couples with larger balances
If one partner’s total super balance is approaching or exceeds $3 million, the strategies above take on an additional dimension. The proposed Division 296 tax measures — legislation for which was introduced to Parliament in February 2026, with an intended commencement of 1 July 2026 — would introduce higher tax rates on a proportion of super earnings attributable to balances above $3 million, with a further tier for balances above $10 million. The effect would be to reduce the tax concessions currently available on earnings linked to those higher balances.
For a couple where one partner has $4 million and the other has $1.5 million, systematically rebalancing through contribution splitting and spouse contributions over several years could reduce the higher-balance partner’s Division 296 exposure while improving the couple’s combined flexibility. The effect is gradual — you cannot split or contribute your way out of a $4 million balance overnight — but over time, even modest annual rebalancing can shift the tax profile meaningfully.
This kind of planning requires professional advice, because the interaction between contribution caps, transfer balance caps, Division 296 thresholds, and Centrelink means tests is genuinely complex. The Division 296 measures are covered in detail in a separate article in this series.
Discussion points for your adviser
At your next review as a couple, consider raising these questions:
• What is the current balance split between our super accounts, and is the gap large enough to warrant a rebalancing strategy?
• Would contribution splitting from the higher earner’s account make sense given our respective ages and retirement timelines?
• If one of us is not working or earning a low income, should the other be making spouse contributions — and are we capturing the tax offset?
• Is either of us eligible for the government co-contribution, and are we making the personal contribution needed to trigger it?
• How do our combined super balances interact with the transfer balance cap, and would more equal balances give us more room as those balances grow?
References
• Australian Taxation Office. “Superannuation contributions splitting.” Eligibility, age requirements, and how to request a split. ato.gov.au.
• Australian Taxation Office. “Superannuation-related tax offsets.” Spouse contribution tax offset — eligibility, income thresholds ($37,000 / $40,000), and maximum offset ($540). ato.gov.au.
• Australian Taxation Office. “Super co-contribution.” Eligibility requirements, income thresholds ($47,488 / $62,488 for 2025–26), and maximum government contribution ($500). ato.gov.au.
• Australian Taxation Office. “Paid Parental Leave Superannuation Contribution.” Payment mechanics, interaction with concessional contributions cap. ato.gov.au.
• Australian Taxation Office. “Transfer balance cap.” Current cap ($2 million), confirmed increase to $2.1 million from 1 July 2026. ato.gov.au.
• Parliamentary Library. “Treasury Laws Amendment (Building a Stronger and Fairer Super System) Bill 2026.” Bills Digest No. 48, 2025–26. Division 296 tax thresholds and structure. aph.gov.au.
