If your partner is currently unemployed, a low-income earner, or working part-time, adding to their super could benefit you financially, specifically by way of spouse super contributions.
Introduction – spouse super contributions
Your partner may be accumulating little or no super to fund their retirement if they’re not a big-income earner, out of work, or working fewer hours.
If you would like to help them by contibuting money into their super, you may be eligible for a tax offset while also potentially creating additional opportunities for you.
We can explain how the spouse contributions tax offset works, what contributions splitting is and how the two to differ.
The spouse super contributions tax offset – are you eligible?
To be eligible for the spouse contributions tax offset:
- It would be best if you made a non-concessional contribution to your spouse’s super. It is a voluntary contribution made using after-tax money, which you do not claim a tax deduction for.
- You need be married or in a de facto relationship.
- You both must be Australian residents.
- The receiving spouse’s income must be less than $37,000 to qualify for the entire tax offset and less than $40,000 in order for you to receive a partial tax offset.
What are the financial benefits?
If eligible, you can typically contribute to your spouse’s super fund and claim an 18% tax offset on up to $3,000 via your tax return.
To be viable for the maximum tax offset of $540, you mmust contribute a minimum of $3,000, Additionally, your partner’s annual income needs to be $37,000 or less. If their income is more than $37,000, you’re still eligible for a partial offset. Although, once their income reaches $40,000, you will no longer be eligible for an offset but can still make contributions on their behalf.
Are there spouse super contribution limits?
You can not contribute more than your partner’s non-concessional contributions cap. The cap is $110,000 per year for everyone, noting any non-concessional contributions your partner may have already made.
However, suppose your partner is under 75 and eligible. In that case, they – or you – may be able to make up to three years of non-concessional contributions throughout a single income year under bring-forward rules. Which would permit a maximum contribution of up to $330,000.
It should also be noted that non-concessional contributions can’t be made once someone’s super balance reaches $1.7 million or more as of 30 June of the previous financial year. Therefore, you will not be able to make a spouse contribution if your partner’s balance reaches that limit. There are also limits on the ability to trigger bring-forward rules for certain people with large super balances (more than $1.48 million as of the previous 30 June).
How contributions splitting varies
Another strategy to increase your partner’s super is by splitting up to 85% of your concessional super contributions with them. Which you either received or made in the previous financial year. Concessional super contributions can include employer or salary-sacrifice contributions and voluntary contributions you may have claimed as a tax deduction.
The rules that apply
To be able to use the contributions splitting strategy, your partner must be under or between their preservation age and 65 and not retired. Check the table below if you’re unsure what your partner’s preservation age is.
|Date of birth
|1 July 1962 – 30 June 1963
|1 July 1963 – 30 June 1964
|From 1 July 1964
Are there limits to the amount thatcan be contributed?
Amounts that you split from your super into your partner’s super will count toward your concessional contributions cap. Which is $27,500 per year for everyone.
Additionally, unused cap amounts accrued since 1 July 2018 can also be contributed if they are eligible. Notably, this broadly applies to people who had a total super balance less than $500,000 on 30 June of the previous financial year.
Do all super funds allow for spouse super contributions?
What else you and your partner should be aware of
- If either of you exceeds super contribution caps, subsequent tax and penalties may apply.
- The value of your partner’s investment in a super like yours can go up and down, so before making contributions, ensure you both understand any possible risks.
- The government sets out rules about when you can access your super. Typically, you can access it when you’ve reached your preservation age. Which is be between the ages of 55 and 60, depending on when you were born and when you retire.
- You can not personally make further non-concessional contributions to your super once you have a total super balance of $1.7 million or more, as of 30 June of the previous financial year. However, it is still possible to make contributions to your partner’s super (noting the caps).
Vogue Advisory Group – Where to go for more information
Your circumstances factor into what you both decide to do. As the rules around spouse contributions and contributions splitting can be complex, it’s a good idea to chat with your adviser to ensure the approach you and your partner take is the right one. Contact us if you need advice regarding your super contributions.