Have you got a super spouse?

Did you know that you may be able to contribute to superannuation on behalf of your spouse? Additionally, if your spouse is not working or is a low-income earner, as the contributing partner, you may be able to claim a tax offset.

So do you have a super spouse? Refer to the following table to find out...

Conditions for Eligible Spouse Contribution Entitlement to Spouse Tax offset

Person making contribution (contributing spouse)
  • Taxpayer (derives some income or profits)
  • After tax contribution made to your spouse’s superannuation fund.
  • Australian resident at time of making contribution.
  • The tax offset is limited to 18% of lessor of:
    • $3,000 (reduced by $1 for every $1 that spouse’s assessable income and reportable fringe benefits exceed $10,800); or
    • Total spouse contributions for the year.
  • The maximum tax offset that can be obtained is $540 (ie 18% of $3,000).

  • Person receiving contribution (receiving spouse)
  • Must be legally married to the person making the contribution or living with that person on a bona fide domestic relationship (same sex couples are excluded). Must not live separately or apart from the taxpayer on a permanent basis, even though legally married to the taxpayer; and
  • Must be under age 65; or
  • Aged between 65 and 70 and gainfully employed on at least a part-time basis (minimum of 40 hours of gainful employment in a consecutive period of not less than 30 days in the financial year in which the contribution is made)
  • The super fund receiving the contribution must have details of the spouse’s Tax File Number.
  • Australian resident when contribution received.
  • Assessable income and reportable fringe benefits less than $13,800.

  • Advantages in making a spouse contribution

    A tax offset of 18% is available where your spouse’s assessable income is $10,800 or less with the maximum offset of $540 available. Where the spouse’s income is above $10,800, the offset is calculated on $3,000 reduced by $1 for every dollar that your spouse’s income exceeds $10,800. This means that the offset phases out where the recipient spouse’s income is $13,800 or more.

    In addition to the possible tax benefit, other advantages of making a spouse contribution include:

    • It may be a tax effective method of splitting assets.
    • The ability to fund life cover for the spouse through superannuation.
    • Investing in a concessionally taxed environment (generally a maximum of tax 15% applies to earnings in super as opposed to the investor’s marginal tax rate).

    The future advantages of contributing for the spouse are:

    • Building a large amount of non-concessional contributions which are tax free if cashed or paid as an income from an income stream. Investment earnings received during the accumulation phase of super are taxed and form a taxable component in the fund.
    • The taxable portion of income stream income is subject to a 15% tax offset if paid to recipient aged between 55 and 59 (inclusive).
    • The accumulated super savings can be in a tax-free environment when an income stream is commenced. A complying superannuation fund is generally entitled to a tax exemption for so much of its income as is attributable to its liability to pay current annuity or pension payments.

    How is the spouse’s superannuation taxed?

    Your eligible spouse contributions made to your spouse’s superannuation account are treated as a ‘tax free component’ in the superannuation fund. This means that they are not subject to the tax that applies to certain superannuation contributions. Therefore, the full value of the contribution (less any fees) is invested for your spouse’s retirement. When contributions are eligible to be withdrawn from your spouse’s superannuation fund (generally retirement), they form part of the tax free component of a super lump sum payment. These amounts are not included in your spouse’s assessable income and received tax-free.

    Is there a limit on the amount that I can contribute on behalf of my spouse?

    No. There is no limit on the amount of money that you can invest in your spouse’s superannuation account. While the tax offset is calculated on sums of $3,000 or less, you may contribute more than this if you wish.

    Spouse contributions are non-concessional contributions and as such are subject to the non-concessional cap that applies (currently $150,000 per annum). Non-concessional contributions up to the cap will not be taxed within the fund. If non-concessional contributions exceed the cap, the excess amount will be taxed at the highest marginal tax rate (plus Medicare Levy).

    In certain circumstances, the averaging rules may be utilised which allows up to $450,000 of non-concessional contributions to be made in a financial year. You should discuss your eligibility with your adviser.

    When can monies from Super be accessed?

    Spouse contributions are preserved within super. This means the capital is not accessible until a condition of release is satisfied. A condition of release is a trigger which allows access to super money. Generally this is retirement after reaching preservation age (currently age 55 for those born before 1/7/60). If you have never been gainfully employed then your super money cannot be accessed until age 65.

    Further information

    If you would like to take advantage of making a spouse contribution, we recommend you speak to your adviser who will be able to offer more information and recommend an appropriate strategy for you.

    Zurich can assist you with contacting a financial adviser.

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