Boost Your Spouse’s Super and Reduce Your Tax
Making contributions to your spouse’s superannuation account is a powerful strategy to enhance retirement savings as a couple while enjoying immediate tax benefits. Here’s how spouse contributions work, the eligibility criteria, and key considerations to make the most of this opportunity.
How the Strategy Works
If you make an after-tax contribution to your spouse’s super account, and they earn less than $40,000 per year, you may qualify for a tax offset of up to $540. This strategy not only boosts your spouse’s retirement savings but also reduces your overall income tax.
Key Details for FY 2024/25:
Contribute $3,000 or more to your spouse’s super to receive the full $540 offset.
A partial offset is available for contributions below $3,000 or if your spouse earns between $37,000 and $40,000 annually.
Eligibility Criteria for Spouse Contributions
To qualify for this strategy, the following conditions must be met:
Relationship:
You must be legally married or in a de facto relationship.
You must be living together on a permanent basis. Separated couples do not qualify.
Residency:
Both you and your spouse must be Australian residents at the time of contribution.
Spouse’s Superannuation Account:
The receiving spouse must:
Be under age 75 (contributions must be made within 28 days of the month they turn 75).
Have a Total Super Balance (TSB) of less than $1.9 million as of 30 June in the previous financial year.
Not exceed their non-concessional contributions cap ($120,000 or up to $360,000 under the bring-forward rule).
Case Study: Phil and Karen
Phil and Karen are married with two children. Phil works full-time, earning $100,000 annually, while Karen works part-time and earns $32,000 per year. To help Karen build her super savings, Phil contributes $3,000 into her super account.
Outcome:
Phil receives a $540 tax offset, reducing his income tax liability when filing his tax return.
Karen’s retirement savings grow, helping balance their superannuation accounts over time.
Other Strategies to Boost Spouse’s Super
Co-Contributions:
Your spouse can make a personal after-tax contribution to their super account.
If their income is $45,400 or less, the government may contribute up to $500.
A reduced co-contribution applies if their income is between $45,400 and $60,400.
Contribution Splitting:
Transfer up to 85% of your previous financial year’s concessional contributions into your spouse’s super account.
Includes Super Guarantee (SG), salary sacrifice, and personal deductible contributions.
Important Considerations
Tax Implications:
Contributions count toward the receiving spouse’s non-concessional cap. Exceeding caps can lead to penalties.
Accessing Super:
Contributions made to your spouse’s super cannot be accessed until a condition of release is met.
Total Super Balance:
Ensure your spouse’s TSB remains below $1.9 million to qualify for the tax offset and other super strategies.
Long-Term Planning:
Spouse contributions are an excellent tool for balancing super balances between partners, particularly where there are significant income disparities.
