Spouse super contributions – what are the benefits?

If your partner is earning a low income, working part-time, or currently unemployed, boosting their super could be a smart financial move for both of you.

When your partner isn’t earning much, or is out of work, their super might not be growing enough to support them in retirement. By contributing to their super, you may not only help them but also enjoy some tax benefits yourself.

We’ll explore how the spouse contributions tax offset works and how it differs from contribution splitting.

The spouse contributions tax offset

Are you eligible?

To be entitled to the spouse contributions tax offset:

• You need to make a non-concessional contribution to your spouse’s super. This means you add money from your after-tax income and don’t claim a tax deduction for it.

• You must be married or in a de facto relationship together and are not living apart or separately.

• You must both be Australian residents.

• Your spouse’s income should be $37,000 or less for the full tax offset, and under $40,000 for a partial tax offset.

• Your spouse is under 75 years of age, and their total superannuation balance is less than the general transfer balance cap ($1,900,000 for 2024-25) as at 30 June of the prior year.

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 $120,000 per year for everyone, noting any non-concessional contributions your partner may have already made.

However, if your partner is under 75 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 $360,000.

Another thing to be aware of is that non-concessional contributions can’t be made once someone’s super balance reaches $1.9 million or above as at 30 June 2024. So you won’t be able to make a spouse contribution if your partner’s balance reaches that amount. There are also restrictions on the ability to trigger bring-forward rules for certain people with large super balances (more than $1.66 million in 2024-25). 

There are also different super balance limits in place if you want to take advantage of the bring-forward rules.

How contributions splitting differs

Another way to increase your partner’s super is by splitting up to 85% of your concessional super contributions with them, which you either made or received in the previous financial year. Concessional super contributions can include employer and or salary-sacrifice contributions, as well as voluntary contributions you may have claimed a tax deduction for.

What rules apply for contribution splitting?

To be eligible for contributions splitting, your partner must be between age 60 (preservation age) and 65 (and not retired). 

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 $30,000 per year for everyone.

On top of this, unused cap amounts accrued in the last 5 years 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.

What else you and your partner should know

• If either of you exceeds super contribution caps, additional tax and penalties may apply.

• The value of your partner’s investment in super, like yours, can go up and down, so before making contributions, make sure you both understand any potential risks.

• The government sets rules about when you can access your super. Generally, you can access it when you’ve reached age 60 (preservation age) and retire.

• While you can’t personally make further non-concessional contributions into your super once you have a total super balance of $1.9 million or above (as at 30 June of the previous financial year), it’s still possible to make contributions to your partner’s super (noting the caps).

Where to go for more information

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 your financial adviser to make sure the approach you and your partner take is the right one.

  Source: AMP