Making an after-tax contribution into your spouse’s super could benefit you both – by increasing your spouse’s super and potentially reducing your tax.
How does the strategy work?
If you make an after-tax contribution into your spouse’s super account and they earn less than $40,000 pa, you may be eligible for a tax offset of up to $540.
This strategy could be a great way to grow your super as a couple. Not only could you boost your spouse’s super, the tax offset could help reduce your income tax.
To qualify for the full offset of $540 in 2017/18, you need to contribute $3,000 or more into your spouse’s super and your spouse must earn¹ $37,000 pa or less.
A lower tax offset may be available if you contribute less than $3,000 or your spouse earns more than $37,000 pa but less than $40,000 pa.
Can you make spouse contributions?
To be able to make a spouse contribution, you must be either legally married or in a de facto relationship.
You and your spouse/partner must be Australian residents at the time the contribution is made.
Other key considerations
- To use this strategy, the spouse who receives the contribution must:
- be under age 65, or if between 65 and 69 they meet a ‘work test’
- have a ‘total super balance’ of less than $1.6 million on 30 June of the previous financial year, and
- not exceed their ‘non-concessional contribution cap’, which in 2017/18 is generally $100,000, or up to $300,000 in certain circumstances
- Super can’t be accessed until you meet a ‘condition of release’. For more information, please visit the ATO website at ato.gov.au
Other strategy ideas
There are other strategies you may consider if you want to boost your spouse’s super. These include:
Co-contributions
Your spouse may want to make an after-tax contribution into their own super account. By doing this, the Government may add up to $500 to their super. It’s called a ‘co-contribution’.
To be eligible for the full co-contribution in 2017/18, your spouse needs to contribute $1,000 or more into their super and earn¹ $36,813 or less.
They may receive a lower amount if they contribute less than $1,000 and/or earn between $36,814 and $51,812.
Contribution splitting
Another option is to use a strategy known as ‘contribution splitting’.
This is where you arrange with your super fund to split up to 85% of your previous financial year’s concessional contributions into your spouse’s super account.
Concessional contributions include superannuation guarantee, salary sacrifice and personal deductible contributions, as well as certain other amounts.
You must meet other eligibility criteria to qualify for the Government co-contribution or contribution splitting. We can help you determine whether either of these strategies suit your needs and circumstances.
Seek advice
Please give us a call and we will help you determine if you could benefit from these strategies
Notes
1 – Includes assessable income, reportable fringe benefits and reportable employer super
Please contact Integrity One if we can assist you with any of your financial needs.
Phone: (03) 9723 0522
Suite 2, 1 Railway Crescent
Croydon, Victoria 3136
Email: integrity@iplan.com.au
This information is of a general nature and does not take into consideration anyone’s individual circumstances or objectives. Financial Planning activities only are provided by Integrity One Planning Services Pty Ltd as a Corporate Authorised Representative No. 315000 of Integrity Financial Planners Pty Ltd ABN 71 069 537 855 AFSL 225051. Integrity One Planning Services Pty Ltd and Integrity One Accounting and Business Advisory Services Pty Ltd are not liable for any financial loss resulting from decisions made based on this information. These articles are not owned by Integrity One Planning Services. Please consult your adviser before making decisions using this information.