A YourLifeChoices reader is expecting a sum of money from an inheritance. The amount will put him over the assets test for the Age Pension. He wants to know if there would be any advantage to making a spouse contribution to his wife’s superannuation.
Q. Bill
I am pension age and my wife is a few years off retiring. I am expecting a sum of money from an uncle’s estate that will put me over the assets test. Would it be a better idea to contribute that money to my wife’s super?
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A. Without knowing the sum involved, it probably would. According to the Australian Tax Office, there are two ways of contributing to your spouse’s super:
- You may be able to split contributions you have already made to your super, by rolling them over to your spouse’s super – known as a contributions-splitting super benefit.
- You can make a super contribution directly to your spouse’s super, treated as their non-concessional contribution, which may entitle you to a tax offset.
You may be able to claim a tax offset of up to $540 per year if you make a super contribution on behalf of your spouse (married or de facto) if their income is below $40,000.
Contributions you make to your spouse’s super are treated as their non-concessional contributions, whether or not you’re eligible for the super tax offset.
Contributions
To be eligible:
- the contribution must be made to either a complying super fund or an approved retirement savings account (RSA)
- both you and your spouse must be Australian residents when the contribution is made
- the contribution is not deductible by you
- you and your spouse must not be living separately and apart permanently when making the contribution.
You’re eligible for a tax offset for a contribution made on behalf of your spouse if:
- their income is less than $40,000 in the income year in which the contribution is made, calculated as the sum of their:
- assessable income (disregarding any amount released to your spouse under the first home super saver scheme)
- total reportable fringe benefits amount
- total reportable employer super contributions
- your spouse did not exceed their non-concessional contributions cap in the income year in which the contribution is made
- your spouse had a total super balance less than the general transfer balance cap immediately before the start of the income year in which the contribution is made
- for the 2020–21 and later income years, your spouse was under 75 years old when the contributions are made
- for income years before 2020–21, your spouse was under 70 years old when the contributions were made.
Tax offset
The tax offset amount reduces when your spouse’s income is greater than $37,000 and completely phases out when your spouse’s income reaches $40,000. The tax offset is calculated as 18 per cent of the lesser of:
- $3000 minus the amount by which your spouse’s income exceeds $37,000
- the sum of your spouse contributions in the income year.
The tax offset for eligible spouse contributions can’t be claimed for super contributions that you made to your own fund, then split to your spouse. That is a rollover or transfer, not a contribution.
With respect to Centrelink, any monies held in super accumulation phase are exempt from means-testing until you reach pension age, or 67.
The more money invested in your wife’s superannuation, the less included in means-testing until your wife reaches 67.
Have you ever made a spousal contribution? What was your reason for the contribution? Why not share your experience in the comments section below?
Aslo read: How can I reduce my assets?
In response to the question “have I made a spouse contribution”.
Some years ago I transferred a fairly large sum of money to create a super fund for my wife. She was 62 and was not working, I was 60 and just changed my job thereby gaining a “condition of release” enabling me to access my super. We then created an income stream account for her to supplement our income whilst I salary sacrificed to the max and enjoyed more free time having gone part time. This did a few things: It gave my wife a sense of financial independence, something she’d not had for 25 years, allowed me to tap into the co-contribution scheme, all whilst restoring the original TTR system. I made some subsequent contributions to her fund using the 3 year rule, in part to claim the co-contribution. I am now 65 and retired. My fund is still accumulating but my wife gets a part pension (reduced because of her UK Aged Pension, a small UK company pension for me and deemed income from her super fund). Until I’m 67, when my super balance will probably take us over the assets limit, I’m a “kept man” and loving every minute. None of this was planned. My boss was such an obnoxious pig that when an agency suggested a part time job just after my 60th birthday everything just clicked into place to make my escape possible. Funny how life goes sometimes.