The conversations about super you need to have with your partner
Money isn't the root of all arguments in relationships, but it comes close. David Roberts, manager for mediation services at Relationships Australia, says money pressures are one of the top four reasons that couples separate.
US research has found it is the No. 1 issue that married couples argue about and the second most common cause of divorce after infidelity.
Debt is a common source of arguments, along with secret spending and budgetary pressures such as paying bills.
Kirsty Lamont, director of the comparison site Mozo, says research by her company found around a third of people in relationships fight about money at least once a month.
"Some of the things they get most upset about are their partner's inability to manage a budget, wasting money on things like smoking and gambling, and lying about money," she says.
A recent Westpac survey on finance and separation found that almost 70% of separated couples who rarely spoke about their finances were not in a financially healthy position. It says more than a third of Australians who live in a committed relationship are not financially healthy as a couple.
Income inequality, where one partner earns significantly more than the other, can exacerbate problems by introducing a power imbalance into the relationship. This can even degenerate into financial "abuse" where the partner who wields financial power uses it to control their partner.
But the news isn't all bad. Being honest and transparent about money has been shown to boost both your love life and wallet.
The conversations you need to have about super
Richard Carey, Omniwealth senior financial adviser, says the winding back of tax concessions for super has heightened the importance of getting twice the bang for your buck. "The real issue is that you're treated as individuals, not a couple, with super," he says.
"So you need to look at accessing two lots of benefits and also to future-proof yourself from future changes as much as possible."
While legally your super will be regarded as joint property if you separate, Carey says it is more tax effective to "equalise" your retirement savings rather than having them concentrated with the higher earner.
"You're trying to get as much as you can up to $1.6 million in a tax-free pension for retirement, a certain amount in your own names outside super that you won't pay tax on because you're below the tax-free thresholds, and super in the accumulation stage, which is taxed at 15%," he says.
Inevitably, if one spouse is earning more, this will involve topping up the lower earner's super through strategies such as:
- Spouse contributions, where you can claim a maximum tax offset of $540 by contributing $3000 to your spouse's account if they earn less than $37,000.
- The super co-contribution, where eligible fund members receive up to $500 from the government if they make a personal contribution of $1000.
- Splitting your super contributions with your spouse. Carey says you can direct up to 85% of your concessional super contributions to your spouse each year. He says this is not counted towards your spouse's concessional contributions cap (it's still counted towards yours), so they can contribute a further $25,000 if they have the income.
- Concessional contributions. From this year, if your account balance is less than $500,000, you can carry forward any unused concessional contributions from last year on top of the standard $25,000 contribution. Those unused amounts will be available for up to five years. As concessional contributions are taxed at 15% in super, this won't be tax effective for those on low incomes, but Chris Giaouris, partner and principal adviser at Chronos Private, says if you have made a big capital gain, or your spouse has a short-term higher income, you can use this to top up their super tax effectively.
- Non-concessional contributions. Carey says you can make after-tax contributions of up to $100,000 a year, or up to $300,000 for the next three years under the "bring-forward" rule, to your spouse's super (the amount depends on the account balance). He says if you have non-preserved benefits in your own fund or are over 60 and meet a condition of release (such as changing jobs) you may also be able to withdraw money from your own fund to contribute to your spouse's. As the money in her fund is now untaxed, he says this can have estate planning benefits and potentially protect your spouse if there are further changes to super taxes.