How to boost your spouse’s super

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Contributing to your spouse’s super may be a tax effective way to boost their retirement savings. It’s also a strategy that could be particularly useful in instances where there is a gap in retirement age between you and your spouse.

There are two ways in which you can share your super with your spouse:

  1. Spouse super contributions; and
  2. Contributions splitting.

Spouse super contributions

Spouse super contributions may allow you to claim a tax offset for the contribution if certain conditions are satisfied. These contributions are particularly effective when made on behalf of non-working or low-income-earning spouses, or where one spouse has a greater super account than the other.

You may be able to claim a tax offset of up to $540 depending on the amount of the contribution made and the recipient’s assessable income (AI), reportable fringe benefits (RFB) and reportable employer superannuation contributions (RESC) for the income year.

While there is no limit on the amount of the contribution, it is classified as a non-concessional contribution and therefore subject to the spouse’s non-concessional contributions cap. As such you cannot claim the contribution as a deduction. However, the amount of the tax offset it limited to a maximum of $540, which is calculated as 18% of the lesser of:

  • $3000 – [(recipient spouse’s AI + RFB + RESC) – $10,800)]; and
  • the amount of the spouse contribution.

The maximum tax offset tapers off when the recipient’s total income exceeds $10,800, and is completely depleted when their income reaches $13,800.

To be eligible, the recipient must be your spouse. A spouse includes a person who, although not legally married to you, lives with you on a genuine domestic basis as your husband or wife. It doesn’t include a person to whom you are married, but who lives separately and apart from you on a permanent basis.

While there are no employment requirements for you as the contributor, your spouse must meet the work test at the time the contribution is made if they are aged 65 but below 70. This means they are gainfully employed for at least 40 hours in a consecutive period of 30 days in the financial year. Spouse contributions cannot be accepted when the recipient is aged over 70.

Also, both you and your spouse must be Australian residents at the time the contributions are made, and the contribution must be made to a complying super fund to provide super benefits for your spouse or provide death benefits for your spouse’s dependants.

You are able to claim the tax offset for spouse contributions in your tax return.

Splitting contributions with your spouse

Super contribution splitting also enables couples to grow two super balances. This may be relevant where spouses wish to even up their super accounts, or direct super to the older spouse nearing age 60 where benefits may be withdrawn tax free.

There are two types of splittable contributions:

  1. Taxed splittable contributions; and
  2. Untaxed splittable employer contributions.

Taxed splittable contributions allow you to transfer up to 85% of the financial year’s concessional contributions to your spouse (up to the concessional contribution cap). These include contributions made by employers, including salary sacrifice contributions, and any personal contributions that are to be claimed as a deduction. The maximum that can be split is the lesser of 85% of concessional contributions for the financial year, and the concessional contributions cap for that financial year.

Untaxed splittable employer contributions are employer contributions for members of a public sector super scheme. The maximum splittable amount is 100% of the concessional contributions cap for that financial year.

You can split contributions regardless of your own age, but your spouse must be less than 55, or if aged between 55 and 64, they must not be retired. The payment of the contribution into the spouse’s account is called a ‘contributions-splitting super benefit’, which is paid as a rollover super benefit.

Contributions splitting may occur in the financial year immediately after the financial year in which the initial contributions were made, or in the financial year in which the contributions were made if the entire benefit is being withdrawn before the end of the year, by a rollover or lump sum benefit.

Watch your cap

Importantly, contribution splitting doesn’t reduce your contributions for reporting and contribution cap purposes. For example, if you make concessional contributions worth $30,000, exceeding the concessional cap of $25,000, the amount that could be split would be limited at the cap of $25,000 and not 85% of the $30,000 (which is be $25,500). Further, regardless of if you plan to split the contributions, you will still be considered to have exceeded your cap.

Some considerations to be aware of are that contribution splitting may only be made once during the same contribution period. Also, if you wish to claim a tax deduction for personal super contributions, you must lodge that notice before notifying your fund that you want to split your contributions.

Further, super funds are not required to offer contributions splitting, therefore it is important to check whether this will affect you and your spouse before attempting a transaction.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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