Your other half might be accumulating little or no super at all to fund their retirement if they’re not a big-income earner, or they’re out of work or working less hours. 

If you’d like to help them by putting money into their super, you might be eligible for a tax offset, while potentially creating additional opportunities for both of you. 

Below we explain how the spouse contributions tax offset works, in addition to what contributions splitting is and how the two differ. 

The spouse contributions tax offset

Are you eligible?

To be entitled to the spouse contributions tax offset: 

• You must make a non-concessional contribution to your spouse’s super. This is a voluntary contribution made using after-tax dollars, which you don’t claim a tax deduction for.

• You must be married or in a de facto relationship.

• You must both be Australian residents.
 

• The receiving spouse has to be under age 67, or if they’re between 67 and 74 they must meet work test requirements, where they’ll need to have been employed during the financial year for at least 40 hours over a period of 30 consecutive days. A work test exemption may also apply.

• 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 financial benefits?

If eligible, you can generally make a contribution to your spouse’s super fund and claim an 18% tax offset on up to $3,000 through your tax return. 

To be eligible for the maximum tax offset, which works out to be $540, you need to contribute a minimum of $3,000 and your partner’s annual income needs to be $37,000 or less. If their income exceeds $37,000, you’re still eligible for a partial offset. However, once their income reaches $40,000, you’ll no longer be eligible for any offset, but can still make contributions on their behalf. 

Are there limits to what can be contributed?

You can’t contribute more than your partner’s non-concessional contributions cap, which is $110,000 per year for everyone, noting any non-concessional contributions your partner may have already made. 

However, if your partner is under 67 and eligible, they (or you) may be able to make up to three years of non-concessional contributions in a single income year, under bring-forward rules, which would allow a maximum contribution of up to $330,000. 

Another thing to be aware of is that non-concessional contributions can’t be made once someone’s super balance reaches $1.7 million or above as at 30 June of the previous financial year. So, you won’t be able to make a spouse contribution if your partner’s balance happens to reach that amount. 

There are also different super balance limits in place if you want to take advantage of the 

bring-forward rules.
 

What rules apply?

To be eligible for contributions splitting, your partner must be under their preservation age, or between their preservation age and 65 (and not retired). If you’re not sure what your partner’s preservation age is, check the table below.

Are there limits to how much can be contributed?

Amounts you split from your super into your partner’s super will count toward your concessional 

contributions cap, which is $27,500 per year for everyone. 

On top of this, unused cap amounts accrued since 1 July 2018 can also be contributed, if they’re eligible. Note, this broadly applies to people whose total super balance was less than $500,000 on 30 June of the previous financial year. 

Do all super funds allow for this type of arrangement?

You’ll need to talk to your super fund to find out whether it offers contributions splitting, and it’s also worth asking whether there are any fees. 

Your circumstances will play a big part in what you both decide to do. And, as the rules around spouse contributions and contributions splitting can be complex, it’s a good idea to chat to us to make sure the approach you and your partner take is the right one. 

©AWM Services Pty Ltd. First published July 2021