Spouse contributions to super

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.

Who is a spouse?

Spouse means both a legal or a de facto husband or wife, but does not include a person who lives separately and apart from the taxpayer on a permanent basis, even though legally married to the taxpayer.

What is the tax and preservation treatment of spouse contributions?

Spouse contributions are preserved. They are not taxed on receipt into the superannuation fund; however they are counted towards the recipient’s non-concessional cap. Contributions in excess of the cap are taxed at the highest marginal tax rate plus Medicare levy. The contributing spouse is not entitled to claim a tax deduction for spouse contributions, however they may be entitled to a tax offset of up to $540 per annum.

How does the spouse offset work?

A tax offset of 18% is available where the 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 the spouse’s income exceeds $10,800. Therefore the offset is reduced to zero by the time the spouse’s assessable income is $13,800. The spouse who is receiving the contributions must be under 65 years old if they are not working.

Advantages of contributing

The advantages of contributing for a spouse can be:

• In some cases, you can claim a tax offset of up to $540, thus reducing the contributor’s PAYG tax liability.
• For some people it is a tax effective method of splitting assets.
• Investing in a concessionally taxed environment (generally a maximum of 15% as opposed to the investor’s marginal tax rate).

• Building a large amount of non-concessional contributions which are tax free if cashed, or paid as tax free income from an annuity or pension (investment earnings are taxed while in the superannuation plan during this accumulation phase).
• The annuity or pension income will be subject to a 15% taxoffset if paid to recipient aged between 55 and 59 (inclusive).
• The investment can be in a tax-free environment when an income stream (annuity or pension) 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 provisions.