Last updated on 6th Jul 2023
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What are eligible spouse contributions? Eligible spouse contributions provide an option to help balance superannuation savings between spouses. But what exactly are they, and how can they benefit you?
An eligible spouse contribution is a superannuation contribution made on behalf of your spouse. Certain rules govern when these contributions can be made and who qualifies as an ‘eligible spouse’. Contributions must be received by the super fund no later than 28 days after the end of the month in which the receiving spouse turns 75. Contributions cannot be accepted by the fund after this deadline. The spouse making the contribution can be of any age.
To claim a tax offset for the contribution, both you and your spouse must be Australian residents when the contribution is made. An eligible spouse includes a legal spouse and a de facto spouse (including same-sex couples) but excludes couples living separately and apart on a permanent basis.
Tax implications Spouse contributions are counted towards the non-concessional contributions (NCC) cap of the receiving spouse and form part of the tax-free component. The contributions are preserved until the receiving spouse meets a condition of release, such as retirement on or after the preservation age or permanent incapacity. No tax applies to the amounts withdrawn when they become accessible.
The contributing spouse may be entitled to claim a non-refundable tax offset if the receiving spouse has income below certain thresholds. The receiving spouse’s assessable income, reportable fringe benefits, and reportable employer superannuation contributions must be less than $40,000. The maximum offset is $540, calculated at 18% on up to $3,000 of spouse contributions, but reduced by $1 for every $1 by which the total assessable income exceeds $37,000. No offset is payable when income reaches $40,000.
Example Jack makes a spouse contribution of $5,000 on behalf of his wife Jill (age 58). Jill’s assessable income plus reportable fringe benefits and reportable employer superannuation contributions for the financial year total $38,200. Jack is entitled to a spouse contribution tax offset of $324 (i.e., [$3,000 – ($38,200 – $37,000)] x 18%).
Who are they appropriate for? Making a spouse contribution is an effective option to help build retirement savings in the names of both members of a couple. This can allow each person to have flexibility in retirement and maximise retirement incomes, while also creating potential tax benefits.
Besides the tax offset benefit, building superannuation savings using spouse contributions may help provide tax advantages on earnings and withdrawals.
To find out if eligible spouse contributions are the right option for you, see us today!
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
