How to boost your spouse’s balance and make the most of super caps (including calculator)

Topping up your spouse’s super account is a great way to build the nest egg you will both get to share and enjoy during your retirement years.

What’s more, it can also help you maximise the amount you can hold in tax-free pension accounts after retirement, reduce your liability for the proposed tax on the earnings of super balances above $3 million, or keep your total super balance low enough to use a wider range of contribution options. 

You may even qualify for a tax offset or a higher rate of Age Pension.

If you’re looking for easy ways to boost your spouse’s super balance, read on for SuperGuide’s simple explanation of three different strategies you can use to do it.

Why boost your spouse’s balance?

Before we dive into the methods you can use to add to your spouse’s super, let’s consider the reasons it could be beneficial.

Maximising the opportunity to contribute to super

The option to carry forward unused concessional contributions is restricted to those with a total super balance below $500,000 on 30 June of the prior financial year. If one spouse’s balance is coming close to the threshold and they are at risk of losing this opportunity, contribution splitting can be used to transfer funds out of their account into that of the partner with a lower balance, retaining the option for longer.

Also, individuals with a total super balance above the general transfer balance cap (currently $1.9 million) cannot add further non-concessional contributions to super. Spouse contribution splitting and/or withdrawals after retirement can reduce the balance of a partner that would otherwise exceed this limit, so they can retain the option to make non-concessional contributions.

Equalising balances

At retirement, the transfer balance cap places a per-person limit on the amount that can be transferred into the tax-free retirement phase. Equalising balances can maximise the total a couple can transfer if only one of them would otherwise have a balance above the cap (currently $1.9 million).

The planned additional tax on earnings of super balances above $3 million is another incentive to equalise balances if either partner expects to accumulate a balance higher than the threshold. If you can both remain below the cap, the new tax will not apply. 

If your combined balance will be more than $6 million, there is no way to avoid exceeding the cap except withdrawing the excess funds from super after retiring. However, the tax liability can be minimised by ensuring you both have at least $3 million in your accounts. This ensures the additional tax applies to the smallest proportion of your balance possible.

Enhancing Age Pension

When one partner is older than the other, retaining super in the account of the younger spouse can enhance Age Pension entitlements while the younger spouse is under the Age Pension age (currently 67).

Using contribution splitting and/or cashing benefits from the older spouse’s account to contribute to their partner’s super reduces the amount counted in Centrelink’s income and asset tests because the superannuation balance of a person under the pension age is not assessable.

With a lower amount being assessed in means tests, the older partner may receive a higher rate of Age pension or qualify for a pension that would not otherwise be payable.

Strategy 1: Split your super contributions

One 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 super than you, or if they are on a lower income and receiving lower SG contributions. It may also be of benefit if your spouse is younger than you and transferring your contributions into their account will help you qualify for higher Age Pension payments.

Who is eligible to use contribution splitting?