- What is contribution splitting?
- Splitting your super contributions: How does it work?
- Who can use contribution splitting?
- Super contributions: What can be split?
- Timing is everything: When you can apply
- 4 things to check before applying to split a contribution
- Spouse contribution tax offset: Saving on your tax bill
- How does the spouse tax offset work?
- Am I eligible for the spouse tax offset?
- How big will my spouse tax offset be?
Topping up your spouse’s retirement savings account with some of your own super contributions can be a great way to help them save for life after work – and possibly save yourself some tax in the process.
Splitting your super contributions with your spouse can be sensible if your spouse is only working part-time or has a limit income. It helps boost the balance of your spouse’s super account and evens out the amount of savings you both have for your retirement years.
What is contribution splitting?
When you split super contributions, you apply to your super fund to transfer or rollover a portion of some contributions you recently made into your super account.
This amount is then transferred into your spouse’s super account to boost the balance of his or her super account.
Note: Contribution splitting and spouse contributions are different from splitting or dividing your super in the case of a relationship breakdown or divorce. The division of super (or payment split) in these situations is part of a financial agreement reached under the Family Law rules.
Splitting your super contributions: How does it work?
Brendon’s employer paid $12,000 into his super account during 2018/2019 as a concessional SG contribution. He would like to split some this contribution with his wife Cassie, who is currently not working.
Brendon fills in the necessary application form and lodges it with his super fund in September 2019. On the form he applies to split $10,000 of his employer’s contributions (taxed splittable contributions) and place the money into Cassie’s super account.
Brendon’s super fund accepts his application as the $10,000 amount is less than 85% of his employer’s $12,000 contribution and is under the concessional (before-tax) contribution cap.
Once the application is accepted and finalised, the super fund transfers $10,000 into Cassie’s super account.
Who can use contribution splitting?
If you want to split contributions with your spouse, it can be done at any age, but your spouse must be either under their preservation age, or aged between their preservation age and 65, and not retired.
Under the rules for contribution splitting, a spouse is a person of any sex you:
- Are legally married to
- Are in a registered relationship with under certain state or territory laws
- Live with on a genuine domestic basis in a relationship as a couple (known as a ‘de facto spouse’).
In addition, you must both be Australian residents when the contribution is made and must not be living separately on a permanent basis.
Super contributions: What can be split?
Super fund members are permitted to ask their super fund to transfer up to 85% of their taxed splittable contributions from a particular financial year into their spouse’s super account.
Taxed splittable contributions are generally any employer contributions (including salary sacrifice contributions) and any personal super contributions you wish to claim a tax deduction for in your income tax return.
Note: You are limited to your concessional contributions cap for that financial year.
From 1 July 2018, you are able to carry-forward any of your unused concessional contributions cap for up to five years, which increases your concessional cap in later years. This means in some years you may be able to split larger amounts with your spouse.
For more information, see SuperGuide article Carry-forward contributions: How your unused contribution limits can help you catch up
Contributions that cannot be split with your spouse generally include:
- Non-concessional (after-tax) contributions
- Contributions made by your spouse to your super account
- First Home Super Saver Scheme and Downsizer contributions
- Government co-contributions and LISTO contributions
- Contributions with a CGT cap election for small business
- Contributions made for you if you are aged under 18 unless they are from your employer
- Transfers and allocations from foreign funds and reserves
- Rollover super benefits
- Temporary resident contributions
- Super benefits subject to a payment split due to a relationship breakdown
Timing is everything: When you can apply
Applications to split your super contributions with your spouse can be made immediately after the financial year in which the contributions were made. For example, if you want to apply to split some contributions during the 2019/2020 financial year, the contributions must have been made into your super account between 1 July 2018 and 30 June 2019.
You can only apply to split contributions in the same financial year if your entire super benefit is being withdrawn before the end of that year as a rollover, transfer or lump sum benefit.
You cannot apply to split your contributions if the amount you ask to split is more than the maximum allowed; your spouse is aged 65 or over; or your spouse has reached their preservation age and is retired.
Note: You can only apply once to split contributions made to a particular super fund in a financial year
4 things to check before applying to split a contribution
- Ask if your super fund offers contribution splitting, because not all super funds will permit it.
- Check which application form you need to complete for contribution splitting. Some funds use the ATO’s Superannuation contributions splitting application form, while others have their own special application form.
- Confirm whether your super fund charges a fee for splitting a super contribution to recover the costs involved for the fund.
- Ensure you lodge the ATO’s Notice of intent to claim or vary a deduction for personal super contributions form before you apply to split your contribution if you intend to claim a tax deduction for a personal super contribution.
Spouse contribution tax offset: Saving on your tax bill
Another way to boost your spouse’s retirement savings is to make a non-concessional (after-tax) contribution directly into their super account.
Spouse contributions not only top up your spouse’s super account, they can also provide a financial benefit provided you meet certain eligibility criteria. With these super contributions, you can claim a tax offset against your year?end tax bill.
Important note: You will not receive the spouse tax offset for super contributions you have made to your own super account then split with your spouse (see Contribution Splitting section above). These are considered a rollover or transfer, not a contribution.
How does the spouse tax offset work?
Karol and Danika meet all the eligibility requirements under the rules for the spouse super tax offset.
Karol is currently working full-time and earning a good salary, but Danika is only working part-time and earned $20,000 in 2018/2019. To boost the balance of Danika’s super account, Karol makes a $4,000 contribution to her super fund.
This means Karol can claim a tax offset in his 2018/2019 tax return for the contribution he paid into Danika’s super account.
The tax offset Karol will receive is calculated by the ATO as 18% of the lesser of:
- $3,000 minus the amount over $37,000 Danika earned ($3,000 – $0 = $3,000)
- the amount of spouse contributions ($4,000)
This means Karol is entitled to a spouse tax offset of $540 (18% x $3,000) when his 2018/2019 income tax is calculated.
Am I eligible for the spouse tax offset?
To receive the spouse tax offset, you need to meet all the qualifying criteria, with one of the key ones being that your spouse’s income must not exceed $40,000. This income amount is calculated based on his or her assessable income, total reportable fringe benefits and reportable employer super contributions.
Also, your spouse must not have exceeded his or her non-concessional (after-tax) contribution cap in the year you make the contribution and they must not have exceeded their transfer balance cap ($1.6 million in 2018/2019) just before the start of the previous financial year.
The contributions need to be made into a complying super fund and both you and your spouse must have been Australian residents when the contributions were made and you must have been living together on a permanent basis.
Your spouse must also have be your spouse at the time the contribution is made and must be gainfully employed if aged between 65 and 69. Spouse contributions cannot be made if the receiving spouse is aged 70 or older.
How big will my spouse tax offset be?
Depending on your spouse’s income and the amount you contribute into his or her account, you may be able to claim a tax offset of up to $540 in your annual income tax return.
If you meet all the eligibility conditions, you will receive a tax offset of 18% on the first $3,000 of super contributions you make for your spouse.
|Annual income for receiving spouse||Your tax offset|
|Less than the low income threshold of $37,000||Full tax offset (18% x contribution amount up to $3,000 limit)18% x $3,000 = $540|
|Between $37,000 and the cut-off threshold of $40,000||Offset reduced by every $1 receiving spouse’s income is over the low income threshold|
|More than $40,000||Nil|
There is no limit to the amount you can contribute to your spouse’s account, provided the contributions do not exceed the non-concessional (after-tax) contributions cap, but the tax offset is only available on the first $3,000 of contributions.