You might share many things with your partner, such as a mortgage, a family, or a car. But did you know that you might be able to boost their super for them? Making a Super Contribution for your spouse could be on the cards.
Depending on your relationship, you may have discussed with your partner the prospect of marriage. Or you might be more comfortable remaining in a long-term de facto relationship. Interestingly de facto relationships have similar rights as those of marriage for tax law.
Specifically, if you (or your partner) were unable to work for a length of time, such as during maternity/paternity leave, unemployment or are a single income household, the super fund of the non-working part of the pair might not be increasing. As a result, the retirement savings held in super for one member of these households may not be growing as exponentially fast as the working member.
Spouse Super Boost
When in a relationship, a spouse can boost their non-working partner’s super fund with their contributions. The best part? It could be a tax write-off for the working spouse.
Under Australian superannuation law, a spouse can be a legally married partner with whom you live or your de facto. That gives additional benefits to those in de facto relationships, who can choose to boost their partner’s super fund. A spouse must also be younger than 75 years old when you contribute.
One of the primary losses of super gains that can occur is a result of maternal or paternal leave. Suppose you and your spouse are thinking about starting a family and may have to take time off work. In that case, spousal contributions can be a great way to continuously inject funds into super so that the contributions can mitigate the gap from the pause in employment.
Super Growth Options
If you are looking to help your spouse’s super grow, there are two ways that you can go about it.
- Making a Super Contribution for your spouse to their super account
- Arranging for Contribution Splitting (also known as Super Splitting)
A Super Contribution for your Spouse can now be made for spouses earning up to $40,000 per year. If a spouse earns less than $37,000, the maximum tax offset of $540 can be claimed when contributing a minimum of $3,000 to their super. Anything contributed that is more than $3 000 will not receive the spouse contribution tax offset.
You will not be able to claim the tax offset if:
- A spouse has exceeded their non-concessional contributions cap for the financial year or,
- Their super balance is $1.6 million (for 2020/21) or more on 30 June of the previous financial year in which the contribution was made.
Super Contribution Split
Another way to inject funds into your spouse’s super is to choose to have some of your super contributions put into their super account. Splitting the contribution is fine as long as they have not reached their preservation age yet, or are between their preservation age and 65 years and not retired.
Super contributions can only be split in the financial year immediately after the year in which the contributions were made or in the same financial year as the contributions were made. The split can only happen if your entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum or benefit.
You can split Contributions in two different ways.
- Employer contributions – the most common form of super contributions to split
- Personal tax-deductible contributions – money that you deposit into your super and claimed a tax deduction.
Your Spouses contributions are generally treated differently to contributions your spouse splits with you.
If your spouse makes a contribution for you, it counts towards your non-concessional contributions cap – not your spouse’s contribution caps. If your spouse currently employs you, when they make contributions these are not spouse contributions, they are employer contributions in this role for you. They may also include amounts transferred from your spouse’s or ex-spouse’s FHSA under a family law obligation.
Suppose you are looking into spousal contributions into super. It is best to seek the advice of your financial advisor to determine what path you should take.
General Advice
The information contained in this article is for general information purposes only. You should obtain professional advice before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person due to action taken or refrained from in consequence of the contents of this article.
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