A private member’s bill to allow for the splitting of super balances between spouses was introduced to the Senate on Thursday.
The bill was tabled by Liberal senator Jane Hume, who said it was aimed at tackling the gender super gap and “goes to the heart of fairness, equity and recognition of the sacrifices made within Australian families”.
“It represents a step towards ensuring that every Australian can look forward to a dignified and secure retirement, especially women,” Hume said.
The bill amends superannuation legislation to give spouses the option to split their collective superannuation balances evenly between them and allows the partner with the higher superannuation balance to roll over an amount from their fund to their spouse’s super fund.
Hume said it was important to understand that this bill is different from super splitting contributions and deals with splitting super balances.
“There is a mechanism already exists to make contributions on behalf of a spouse, however, its take-up is astonishingly low, with only 1.1 per cent of Australians using it in 2021-22 because the process is clunky, complex, eligibility is very limited, there’s a lack of awareness, and critically, there are no real incentives for most people to use it,” she continued.
“Splitting balances – using a roll over from one fund to another – is a genuine structural change that will directly tackle the gender super gap, one of the most systemic structural failures of the superannuation system. And it uses existing mechanisms to do so.”
Hume added that equitable splitting of superannuation is considered in divorce proceedings and has been made simpler without the need for court orders, with standardised forms and recognised tax treatments of a rollover amount from the super account of one partner to another at the end of a relationship.
She said this process should also be allowed during a relationship as part of a proactive, voluntary plan that couples can access.
“This bill doesn’t force anyone to do anything. It simply gives families the option to share what they’ve built together, in recognition of unpaid labour, broken work patterns and professional sacrifices that so often falls to women,” she said.
“[It] explicitly recognises the economic partnership at the heart of most families. It empowers couples to plan for retirement together, allowing a more even distribution of superannuation during the accumulation phase.”
There are “guardrails” attached to the bill to maintain the integrity of the superannuation system, including that the amount transferred from one spouse to another is not considered to be a contribution, rather is treated as an amount “rolled over”.
“This distinction is important to ensure that the amount transferred between spouses does not attract or avoid any additional taxes,” Hume said.
Additionally, the amount rolled over from one spouse to another retains its original characteristics – specifically, it retains the original fund’s proportion of concessional and non-concessional components.
The senator said this means that when someone dies, the money transferred doesn’t have additional tax benefits for beneficiaries.
Furthermore, the ability to roll over an amount from one spouse to another is not available to those transferring from or to a defined benefit scheme, nor is it available to those already in a pension or drawdown phase, with both spouses’ funds required to be in accumulation phase.
Hume said the mechanism can only be used by individuals who have only one superannuation account, an important integrity measure to avoid potential unintended consequences for persons who have multiple funds.
Finally, the amount that can be rolled over from one spouse to another is limited in two ways:
(1) The amount rolled over cannot leave the original fund with a lower balance than the receiving fund.
(2) The amount rolled over cannot cause the receiving fund to have a balance higher than the transfer balance cap.
Referencing the $3 million super tax, Hume said the changes to superannuation that have been proposed by the government are “only about how the government can get their hands on more Australians’ super”.
“But those sorts of changes do nothing to support the integrity of the system, it only risks it. If Labor wants to do something for super, they should be looking at making the system fairer,” she said.
“This [bill] is all about choice; allowing couples to manage their collective retirement savings to reflect their collective choices throughout their lives. The benefits of this reform are clear and far-reaching. This Bill is about more than just superannuation, it’s about closing the gender super gap.”
