It’s possible to make a contribution to your spouse’s super from your after-tax income or receive a contribution to your super from them. Sometimes couples do this when one of them isn’t working, or if one person earns more than the other. Here’s how it works.
What is a spouse contribution?
A spouse contribution is when you use some of your after-tax income to add to your spouse’s account as a super contribution (or you receive a contribution from them).
Making a spouse contribution may be a good idea if one of you has a lower super balance than the other. This can happen if one of you:
- earns a lower salary
- has taken time out of the workforce to care for children or elderly relatives
- works part-time or casual hours
- had a period of unemployment or took a career break.
These factors (along with many others) can make it tricky to build a healthy super balance. This is where a spouse contribution may be able to help.
Spouse contributions will count towards your spouse's after-tax (non-concessional) contributions cap. For the current financial year, the combined amount of non-concessional contributions you can make in a year is $110,000. However, in certain circumstances you may be able to contribute more than this (see How do I make a larger non-concessional contribution?)
What are the benefits of spouse contributions?
There are a lot of potential benefits from making or receiving a spouse contribution.
For example:
It may give the spouse with the lower super balance a greater sense of financial independence and security.
The person making the contribution may be eligible to receive a tax offset which will reduce their taxable payable.
Withdrawing a lump sum from super and re-contributing it to a younger spouse’s super could allow the older spouse to qualify for a higher rate of the government Age Pension when they become eligible.
Having more money in super, spread across both spouses’ accounts, allows you to take advantage of the tax benefits of super and the tax-free pension environment.
What is the spouse contribution tax offset?
A person making a spouse contribution for their partner may be able to claim a tax offset of up to $540 for the contribution in their annual tax return, depending on their spouse’s income and the amount of the contribution.
The tax offset amount is calculated at 18% of the contribution amount, up to a maximum contribution amount of $3,000 p.a.
To be eligible for a full tax offset, the spouse receiving the contribution must have a taxable income of less than $37,000 p.a. To be eligible for a partial offset, they must earn less than $40,000 p.a. No offset will be payable if they earn more than $40,000 p.a.
This is the maximum tax offset amount for a spouse contribution of $3,000:
$37,000 or less
$540
$38,000
$360
$39,000
$180
$40,000 or above
$0
Eligibility criteria for spouse contribution tax offset
While anyone can make a contribution to their spouse’s super, as long as the person receiving the contribution is less than 75 years old, you’re only eligible to claim the spouse contribution tax offset if you meet these criteria:
You’re both Australian residents.
You’re married or in a de-facto relationship and live together.
You don’t claim a personal contribution tax deduction for the spouse contribution.
- The spouse receiving the contribution must:
- have a taxable income of less than $37,000 p.a. for the full tax offset, or less than $40,000 p.a. for a partial tax offset.
- have not exceeded their non-concessional contributions cap unless they are using the bring-forward arrangement to make a larger contribution for that financial year.
- have a total super balance (as at 30 June in the previous financial year) of less than $1.9 million.
Case study: Pay less tax by making a spouse contribution
How Paul reduced his tax by making a spouse contribution to his wife’s super account
Paul and Lisa are a married couple with three young children. Paul works full-time and earns $140,000 per year. He currently has $260,000 in super. For the past four years, Lisa has been working two days a week so she can look after their children on the days when they’re not in daycare. She earns $36,000 per year and currently has $90,000 in super.
To help even things up, Paul makes a contribution of $3,000 from his after-tax income to Lisa’s super account. Because Lisa’s taxable income is less than $37,000, he can claim the maximum tax offset of $540 for the contribution in his next tax return. This will reduce the tax payable on his taxable income by $540, as well as giving Lisa’s super balance a boost.
Contribution splitting
There is also an option to share your own contributions with your spouse. Known as ‘contribution splitting’, this allows you to split up to the lesser of 85% of your before-tax (concessional) contributions for a year and the concessional contribution cap for that year.
However, you can only split certain types of contributions. These include:
- superannuation guarantee contributions
- salary sacrifice contributions
- personal contributions for which you claim a tax deduction.
You can’t split other types of contributions, such as after-tax (non-concessional) contributions.
Both spouses will need to meet certain conditions for you to use this strategy (see Contributions splitting).
To set up contribution splitting with CFS, please complete this form and send it to us.
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Information on this webpage is provided by Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 and Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at www.cfs.com.au/tmd, which include a description of who a financial product might suit. You should read the Financial Services Guide (FSG) available online for information about our services.
Tax considerations are general and based on present tax laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information.
AIL and CFSIL are not registered tax (financial) advisers under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise under a tax law.