Spouse Super Contributions – What Are the Benefits?

Jack Kewalram is a Lane Cove local and a Private Client Adviser with PSK Private Wealth.

PSK Private Wealth is also an ITC Business Supporter, and without the support of Lane Cove locals like Jack, ITC would not exist!!

Jack would love to work with Lane Cove locals to help them with their financial goals.  This month the PSK Wealth team are discussing a common question asked by clients – Spouse super contributions – what are the benefits?

If your partner is a low-income earner, working part-time, or currently unemployed, adding to their super could benefit you both financially.

Your other half might be accumulating little or no super at all to fund their retirement if they’re not a big-income earner, or they’re out of work or working less hours. If you’d like to help them by putting money into their super, you might be eligible for a tax offset, while potentially creating additional opportunities for both of you. Below PSK Private Wealth explain how the spouse contributions tax offset works, in addition to what contributions splitting is and how the two differ.

The spouse contributions tax offset

Are you eligible?

To be entitled to the spouse contributions tax offset:

• You must make a non-concessional contribution to your spouse’s super. This is a voluntary contribution made using after-tax dollars, which you don’t claim a tax deduction for.
• You must be married or in a de facto relationship.
• You must both be Australian residents.
• The receiving spouse has to be under age 67, or if they’re between 67 and 74 they must meet work test requirements, where they’ll need to have been employed during the financial year for at least 40 hours over a period of 30 consecutive days. A work test exemption may also apply.
• The receiving spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.

What are the financial benefits?

If eligible, you can generally make a contribution to your spouse’s super fund and claim an 18% tax offset on up to $3,000 through your tax return.

To be eligible for the maximum tax offset, which works out to be $540, you need to contribute a minimum of $3,000 and your partner’s annual income needs to be $37,000 or less. If their income exceeds $37,000, you’re still eligible for a partial offset. However, once their income reaches $40,000, you’ll no longer be eligible for any offset, but can still make contributions on their behalf.

Are there limits to what can be contributed?

You can’t contribute more than your partner’s non-concessional contributions cap, which is $110,000 per year for everyone, noting any non-concessional contributions your partner may have already made.

However, if your partner is under 67 and eligible, they (or you) may be able to make up to three years of non-concessional contributions in a single income year, under bring-forward rules, which would allow a maximum contribution of up to $330,000.

Another thing to be aware of is that non-concessional contributions can’t be made once someone’s super balance reaches $1.7 million or above as of 30 June of the previous financial year. So, you won’t be able to make a spouse contribution if your partner’s balance happens to reach that amount.

There are also different super balance limits in place if you want to take advantage of the bring-forward rules.

How contributions splitting differs

Another way to increase your partner’s super is by splitting up to 85% of your concessional super contributions with them, which you either made or received in the previous financial year. Concessional super contributions can include employer and or salary-sacrifice contributions, as well as voluntary contributions you may have claimed a tax deduction for.

What rules apply?

To be eligible for contributions splitting, your partner must be under their preservation age, or between their preservation age and 65 (and not retired). If you’re not sure what your partner’s preservation age is, check the table below.

Are there limits to how much can be contributed?

Amounts you split from your super into your partner’s super will count toward your concessional contributions cap, which is $27,500 per year for everyone.

On top of this, unused cap amounts accrued since 1 July 2018 can also be contributed, if they’re eligible. Note, this broadly applies to people whose total super balance was less than $500,000 on 30 June of the previous financial year.

Do all super funds allow for this type of arrangement?

You’ll need to talk to your super fund to find out whether it offers contributions splitting, and it’s also worth asking whether there are any fees.

Your circumstances will play a big part in what you both decide to do. And, as the rules around spouse contributions and contributions splitting can be complex, it’s a good idea to chat to us to make sure the approach you and your partner take is the right one.

Weighing Up your Options

If you have any questions about spouse super contributions or any other recent changes, please contact PSK Financial planner Jack Kewalram at 0435 962 973.

Being a Lane Cove resident, Jack can visit you at your home, office or you can schedule an on-line appointment.  He is also available for out-of-hours appointments.

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©AWM Services Pty Ltd. First published July 2021

( i )The ASFA Retirement Standard June 2022 – table 1
(ii ) Services Australia Age Pension How much you can get – table 1, 20 March 2022

Disclaimer: PSK Financial Services Group Pty Ltd (ABN 24 134 987 205) trading as PSK Private Wealth and Employee Representatives of PSK Advisory Services Pty Ltd trading as PSK Private Wealth are all representatives of AFS licensee, PSK Advisory Services Pty Ltd (ABN 30 008 587 595) AFSL #234656. This document contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.