Contributing to super for your spouse

Important information: Any advice and information in this publication is of a general nature only. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of an individual’s liabilities, obligations or claim entitlements that arises, or could arise, under taxation law, and we recommend that you consult a registered tax agent. nabtrade is not a registered tax agent.

Do you have more super than your spouse? Making contributions into your spouse’s super could help you both enjoy a more rewarding retirement. Prior to the introduction of the $1.6m Total Super Balance and General Transfer Balance caps on 1 July 2017, there was little incentive for spouses to minimise disparities in their super balances, but the introduction of those limits have given rise to an increased interest in balance equalisation strategies.

Share the benefits through spouse contributions

If your partner either earns less than you or is not currently working, they may be adding little or nothing to their super. The good news is that you may be able to take advantage of strategies to boost their retirement savings in a way that can benefit you both.

If you’re married or in a de facto relationship, there are a couple of ways you can help boost your partner’s super balance, including a spouse contribution or a contribution split.

Spouse contributions

If you make a contribution to your spouse’s eligible super account by the end of the financial year you could receive a tax offset of up to $540.
 

Who can make and receive spouse contributions?

To be eligible for the full $540 offset amount, your partner must have income less than $37,000¹ in the 2018/19 financial year, and you must contribute at least $3,000. A lower tax offset may be available if you contribute less than $3,000 or your spouse earns between $37,000¹ and $40,000¹ pa.

You both need to be Australian residents at the time you make the contribution. Your spouse must either be under the age of 65 or, if aged over 65 and less than 70, they need to meet the work test requirements by having proof of working in gainful employment for 40 hours within a consecutive 30-day period during the year.

Spouse contributions will count towards your spouse’s NCC cap, and penalties may apply if they exceed it. The annual NCC cap is $100,000 in 2018/19. The rules that relate to the NCC cap are complex. You can find out more about them at the ATO website.

The offset also won’t apply if your spouse exceeds their non-concessional (after tax) contributions cap for the relevant year, or your spouse has a total super balance above the general transfer balance cap at the end of the previous financial year. The general transfer balance cap is $1.6 million for the 2018/19 financial year.
 

Contributions splitting

Another option for boosting your spouse’s super balance is to split eligible concessional (before-tax) contributions from your account to your spouse. These generally include the Superannuation Guarantee, salary sacrifice contributions and personal contributions for which you claim a tax deduction.
 

How does contribution splitting work?

If your super fund allows, you can split up to 85 per cent of the before-tax super contributions received in the previous financial year. The limit is set at 85 per cent because super funds deduct the 15 per cent contributions tax before the contribution reaches your partner’s super account.

Amounts you split to your spouse will not be treated as contributions in your spouse’s name. They will continue to count towards your concessional contributions cap, in the year you originally received them.

If you’re a member of a public sector fund different conditions may apply. It’s important to check with your fund to see whether or not you’re eligible to split contributions.
 

What are the benefits?

The benefits depend on your age and circumstances. They could include:

• better managing the tax payable if you and your spouse want to draw a superannuation pension before you’re 60 by providing access to two tax-free thresholds;
• the opportunity to take advantage of two super lump sum low-rate thresholds;
• equalising superannuation savings to maximise amounts that can be held in tax-free income streams if you are affected by the $1.6 million transfer balance cap
• reducing the assets assessed for the Centrelink means test if your spouse is younger than you. This could increase your Centrelink entitlement in certain circumstances.
   

Who can split contributions?

To be eligible for contributions splitting, your partner must be less than their preservation age, or between their preservation age and 65 and not retired.
 

Preservation age is based on your date of birth.

Are there any costs?

Not all super funds allow contribution splitting and those that do often have different limits and conditions. A contribution splitting fee may apply. If you’re a member of an SMSF, you’ll need to arrange this through your administrator or accountant.
 

Notes: ¹Includes assessable income, total reportable fringe benefits, and reportable employer superannuation contributions.