If your partner is a low-income earner, working part-time, or currently unemployed, contributing to their super could benefit both of you financially. Here’s how you can make spouse contributions work for you and potentially reduce your tax liability.

What Are Spouse Super Contributions?

Spouse contributions involve adding money into your spouse's super fund using your after-tax income. If your partner earns less than $40,000 per year, you might be eligible to claim a tax offset on the first $3,000 you contribute.

Here’s a breakdown of how much tax offset you can claim:

If your partner earns up to $37,000, you can claim the maximum tax offset of $540. As their income increases, the available offset decreases, phasing out completely once their income reaches $40,000.

Eligibility Criteria for Spouse Contributions

To qualify for the spouse contributions tax offset, you and your partner must meet the following conditions:

• Relationship: You must be married or in a de facto relationship.
• Residency: Both you and your partner must be Australian residents.
• Spouse’s Income: Your partner's assessable income, reportable fringe benefits, and employer super contributions must total less than $40,000.
• Contribution Limits: You can’t contribute more than your partner’s non-concessional contributions cap, which is $120,000 per year.

Additional criteria for the tax offset:

Note: You cannot claim the tax offset if your partner exceeds their non-concessional contributions cap or has a super balance exceeding $1.9 million as of 30 June of the prior financial year.

Maximising Super Contributions

If your partner's super balance is low, this strategy not only boosts their retirement savings but also provides a flexible approach to managing your household’s overall retirement planning. Consider incorporating these contributions into a super equalisation strategy, which can help optimise the use of both your superannuation balances and transfer balance caps.

Contribution Splitting: Another Way to Support Your Partner

Beyond after-tax contributions, you can also split up to 85% of your concessional super contributions with your partner. This includes employer and salary-sacrifice contributions, as well as any voluntary contributions for which you claim a tax deduction. Contributions splitting can help grow your partner’s super over time, especially if they have a lower super balance than you.

Partner must be between 60-65 years old and not yet retired

Balance requirement for splitting unused cap amounts

Must have a super balance under $500,000 as of 30 June of the previous year

Key Considerations Before Making Spouse Contributions

When considering spouse contributions, it's important to evaluate both your financial circumstances and potential tax benefits. Here are some factors to keep in mind:

1. Contribution Caps: Be aware of the annual caps on both concessional and non-concessional contributions to avoid penalties.
2. Tax Implications: If either you or your partner exceed the contribution caps, additional taxes and penalties may apply.
3. Super Balance Limits: Contributions cannot be made to your partner’s super if their balance exceeds $1.9 million as of the prior financial year.
4. Investment Risks: Superannuation is subject to market fluctuations, and both you and your partner should understand the risks involved in increasing super contributions.
5. Accessibility: The government sets rules about when super can be accessed. Typically, it’s available when you’ve reached age 60 and retired, or under other conditions such as severe financial hardship.

Making Spouse Contributions

Making a spouse contribution is a relatively straightforward process. All you need are your partner’s super account details. Most super funds offer easy options for making contributions, such as using BPAY®, submitting a contribution form, or visiting a member centre in person. It’s important to ensure that your partner’s super fund has their tax file number on record, as this is a requirement for making contributions.

 Once you’ve made the contribution, you can claim the tax offset when lodging your annual tax return. Simply fill out the relevant details in your tax return, and the offset will be applied to reduce your tax liability.

Spouse contributions can offer a powerful way to boost your partner's super and secure their retirement future, all while potentially providing you with tax savings. Whether you're looking to contribute after-tax dollars or split concessional contributions, these strategies can help you work together towards a more comfortable retirement.

Before making any decisions, it’s always a good idea to seek professional financial advice to ensure these strategies are right for you and your partner.