Topping up your spouse’s super account is a great way to build the nest egg you both have to share during your retirement years.
And you may be able to save yourself some tax in the process.
If you’re looking for easy ways to boost your spouse’s super balance, check out SuperGuide’s simple explanation of two ways to do it:
1. Make a spouse contribution tax offset
One of the easiest ways to boost your spouse’s retirement savings is to make a non-concessional (after-tax) contribution directly into your spouse’s super account.
Spouse contributions not only top up your spouse’s super account, they can also provide you with a financial benefit – provided you meet certain eligibility criteria.
Making a spouse contribution could mean you earn a spouse contribution tax offset you can claim against your tax bill for the financial year in which you make the contribution.
Who is eligible to receive a spouse contribution?
To make a spouse contribution, your spouse (sometimes called the receiving spouse) must:
- Not have exceeded their non-concessional contribution cap ($100,000 in 2020/21) in the financial year you make the contribution into their account
- Have a Total Super Balance (TSB) of less than $1.6 million on 30 June in the financial year before the contribution was made
- Be under age 75 (once your spouse turns 75, you can no longer make contributions on their behalf)
- Have met the work test or work test exemption rules if they are aged 67 or over. For more information, read SuperGuide article Work test: Making super contributions over 67.
Need to know
Up to 30 June 2020, spouse contributions could only be made if the receiving spouse was aged under 70.
In May 2020, Superannuation Legislation Amendment (2020 Measures No.1) Regulations 2020 changed this requirement and lifted the upper age limit to age 74 for a receiving spouse. This aligns spouse contributions with the cut-off age of 75 for other voluntary super contributions.
What is the spouse contribution tax offset?
If you decide to make a contribution into your spouse’s super account, you may be eligible to receive a tax offset of up to $540 on your annual tax bill.
To receive the spouse tax offset, you need to meet all the qualifying criteria:
- Your spouse’s assessable income, total reportable fringe benefits and reportable employer super contributions must not exceed $40,000 (2020/21)
- Your contribution must not be tax deductible to you
- Your contribution must have been made into a complying super fund
- You and your spouse must both be Australian residents when the contributions were made
- You and your spouse must be living together on a permanent basis.
Need to know
You will not receive the spouse tax offset for super contributions you have made into your own super account then split with your spouse (see Contribution Splitting section below). These are considered a rollover or transfer, not a contribution.
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 receive a tax offset of up to $540 in your annual income tax return.
If you meet all the eligibility conditions, you could receive a tax offset of up to $540.
| Annual income for receiving spouse | Your tax offset |
|---|---|
| Less than the low income threshold of $37,000 | Up to a full tax offset of $540 (actual amount is calculated as 18% of the lesser of $3,000 and your total contributions for your spouse) |
| Between $37,000 and the cut-off threshold of $40,000 | Offset amount is reduced by every $1 the receiving spouse’s income is over the low-income threshold |
| More than $40,000 | Nil |
* To calculate your actual tax offset, the ATO has a simple worksheet available on its website here.
There is no limit to the amount you can contribute to your spouse’s account, provided your contributions do not exceed your spouse’s non-concessional (after-tax) contributions cap, but the tax offset is only available on the first $3,000 of contributions.
Case study
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 will earn $20,000 in 2020/21. To boost the balance of Danika’s super account, Karol makes a $4,000 contribution into her super fund.
This means Karol will receive a tax offset in his 2020/21 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 2020/21 income tax is calculated.
2. Split your super contributions
Another way to boost your spouse’s super account balance is to split the concessional contributions made into your own super account and transfer some of them into your spouse’s account.
This can be a good way to equalise your super account balances if your spouse has less in their super account, or if they are on a lower income and receiving lower SG contributions. It may also help you if your spouse is younger than you and transferring your contributions into their account will help you qualify for a higher Age Pension.
Good to know
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.
Split super contributions remain preserved until the receiving spouse reaches their preservation age.
Who is eligible to use contribution splitting?
If you want to split your super contributions with your spouse, the receiving 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 gender 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 (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.
Good to know
Splitting your concessional (before-tax) contributions with your spouse does not reduce the amount counted towards your concessional contributions cap ($25,000 in 2020/21).
Your super fund still reports all the super contributions made into your account during a financial year, including any contributions later transferred to your spouse.
What super contributions can be split?
You can ask your super fund to transfer up to 85% of your taxed splittable contributions from a particular financial year into your 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.
Need to know
The maximum amount of taxed splittable contributions you can split with your spouse in a particular financial year is limited to your concessional contributions cap for that year ($25,000 in 2020/21).
You can only split the lesser of 85% of your concessional contributions for that year and 85% of the current concessional contributions cap for that year.
From 1 July 2019, you are able to carry forward your unused concessional contributions cap for up to five 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 to use your unused contribution caps to boost your super
Contributions that cannot be split with your spouse generally include:
- Personal contributions that you can’t claim a tax deduction for
- 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.
Need to know
Brendon’s employer pays $12,000 into his super account during 2020/21 as a concessional SG contribution. He would like to split some of 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 2020. 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.
When can I apply to split my contributions?
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 2020/21, your contributions must have been made into your super account between 1 July 2019 and 30 June 2020.
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
- Your spouse has reached their preservation age and is retired.
Need to know
You can only apply once each financial year to split contributions made into your super account.
4 things to check before applying to split your super contribution
- Check whether your super fund offers contribution splitting, as not all super funds 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 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.
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