Super Co-Contributions Boost On Behalf of A Spouse

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Marriage and de facto relationships come with a number of perks – but did you know that if your partner earns less than you or is not currently working, you could contribute to their super fund savings?

Many households in Australia, either as a result of unemployment, maternity/paternity leave or by choice, have single-income households. As a result, the retirement savings held in super for one member of these households may not be increasing as exponentially fast as the working member. The good news is that when in a relationship, a spouse can boost their non-working partner’s super fund with their own 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 partner. That gives additional benefits to those in de facto relationships, who can choose (if one member of the relationship isn’t working or earns less) to boost their partner’s super fund. A spouse must also be younger than their preservation age or between 65 and their preservation age and not retired.

There are two ways that someone can help their partner’s superannuation grow:

  • Making a Spouse Contribution to their super account
  • Arranging for Contribution Splitting (also known as Super Splitting)

Spouse superannuation contributions 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.

This tax offset cannot be claimed if:

  • A spouse has exceeded their non-concessional contributions cap for the financial year.
  • 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.

Another way to inject funds into your spouse’s super is to choose to have some of your own super contributions put into their super account. This 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 only if your entire benefit is being withdrawn before the end of that financial year as a rollover, transfer, lump sum or benefit.

There are two types of contributions that can be split:

  • Employer contributions – the most common form of super contributions to split
  • After-tax contributions – money that you voluntarily deposit into your super after tax.

Always discuss starting spousal co-contributions to super with your accountant or financial advisor for help and guidance prior to starting this process.

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