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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 new 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.
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: Make a spouse contribution, get a tax offset
One of the easiest ways to boost your spouse’s retirement savings is to make a non-concessional contribution directly into your spouse’s super account from your after-tax income.
Spouse contributions not only top up your spouse’s retirement savings; they 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 annual non-concessional contributions cap ($110,000 in 2023–24) in the financial year you make the contribution into their account
- Have a Total Super Balance (TSB) of less than $1.9 million on 30 June in the financial year before the contribution is made
- Be under age 75 (once your spouse turns 75, you can no longer make contributions on their behalf).
What is the spouse contribution tax offset?
If you decide to contribute to 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 be under $40,000
- 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.
*Any First Home Super Saver Scheme (FHSSS) release amounts are not counted.
How much will my spouse tax offset be?
Depending on your spouse’s income and the amount you contribute into his or her account, you could receive a tax offset of up to $540 in your annual income tax return.
|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
|The maximum offset amount is $540 minus $0.18 for each dollar the receiving spouse’s income is over the low-income threshold. You receive an offset of 18% of your contribution, up to the maximum offset that applies based on your spouse’s income.
|More than $40,000
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.
Strategy 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 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?
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. You can’t apply to split your contributions if your spouse is aged 65 or over.
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.
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 have claimed as a tax deduction in your income tax return.
Members of public sector super funds are also permitted to split their untaxed splittable employer contributions with their spouse, but not all these funds permit contribution splitting, so check with your fund before applying.
Contributions that cannot be split with your spouse generally include:
- Personal contributions for which you can’t claim a tax deduction
- 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
- Contributions you make with a personal injury election
- Contributions that have already been split.
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 of your super contributions from 2023–24, you may apply any time after 1 July 2024.
Alternatively, you can apply to split contributions in the same financial year they were made if your entire super benefit is being withdrawn before the end of that year as a rollover, transfer, lump sum benefit or a combination of these.
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.
4 things to check before applying to split your super contribution
- Check whether your super fund offers contribution splitting, as not all super funds do.
- 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
Strategy 3: Withdraw from your super to add to your spouse’s account
Once you have full access to your super, the option to make withdrawals can allow balances to be shared more equally between you and your partner.
Full access to super is granted when you are retired and have reached your preservation age, reach age 65, leave a job after age 60, or become permanently incapacitated. Withdrawals are tax free after age 60, unless your super is with a rare untaxed super fund.
Amounts withdrawn may be recontributed to the account of the spouse with a lower balance, subject to the usual contribution limits.