If your spouse (husband, wife, de facto or same-sex partner) is a low-income earner or not working at the moment, chances are they’re accumulating little or no super at all to fund their retirement. 

The good news is, if you help by contributing some of your own money to their super, you could be eligible to receive a tax rebate. And, with super rules set to change from 1 July 2017, this tax advantage will be accessible to even more people. 

How do I know if I’m eligible?

• To be entitled to the spouse contributions tax offset:
• You need to make an after-tax contribution to your spouse’s super account
• You must be married or in a de facto relationship. This includes same-sex couples, however if you are a married couple that isn’t living together, you won’t be eligible
• You must both be Australian residents
• The receiving spouse has to be under the age of 65, or if they are between 65 and 69 they must meet work test requirements
• Before 1 July 2017, the receiving spouse’s income must be $10,800 or less for you to qualify for the full tax offset and less than $13,800 for you to receive a partial tax offset
• After 1 July 2017, 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 tax benefits?

Currently

If your partner has no source of income or is a low-income earner, you can make after-tax contributions to their super fund and claim an 18% tax offset on up to $3,000. 

To be eligible for the maximum tax rebate, which works out to be $540, you need to contribute a minimum of $3,000 and your partner’s annual income needs to be $10,800 or less. 

If their income exceeds $10,800, you’re still eligible for a partial tax offset. However, once their income reaches $13,800, you’ll no longer be eligible, but can still make contributions on their behalf. 

Also note, what you contribute will count towards your partner’s non-concessional contributions cap (the maximum amount that can be put into super after tax). The current limit is $180,000 per year. 

From 1 July 2017

The government will increase access to the spouse contributions tax offset from 1 July 2017 by raising the lower income threshold from $10,800 ($13,800 cut off) to $37,000 ($40,000 cut off). 

Another thing to be aware of is the after-tax (non-concessional) contributions cap will be reduced from $180,000 to $100,000 per year. 

Are there other things I can do?

Another way you can contribute to your partner’s super is by splitting up to 85% of your before-tax super contributions, such as employer and or salary sacrifice contributions, as well as personal tax deductible contributions, which you received in the previous financial year. 

To be eligible for before-tax ‘contributions splitting’, your partner must be under 65 and still working. 

Amounts that you split between your and your partner’s super will also be counted against your before-tax (concessional) contributions cap. 

Currently this cap is $30,000 per year, or $35,000 for people age 50 and over. After 1 July 2017, the before-tax contributions cap will be reduced to $25,000 per year, for everyone, irrespective of age. 

What my partner and I should know

• If either of you exceed the super cap limits, additional tax and penalties may apply.
• The value of your partner’s investment in super, like yours, can go up and down. Before making contributions, make sure you both understand risks tied to your investment options.
• The government sets general rules about when people can access their super. This means if either of you want access to your super, typically you’ll need to have reached your preservation age, which will be between 55 and 60, depending on when you were born.

We're here to help

Talk to us about how upcoming super changes could impact you and what opportunities you may be able to take advantage of if you act before 1 July 2017. 

Meanwhile, your circumstances and retirement goals will play a big part in the strategy you opt for. And, as the rules around spouse contributions and contributions splitting can be complex, it’s a good idea to chat to us to ensure the approach you and your partner take is the right one.

AMP