If your spouse is a stay-at-home parent, freelancing, studying or out of work, adding to their super could benefit you both financially.
Building a nest egg is crucial to funding yourselves through retirement. If your spouse is a low-income earner or taking a breather from the 9-5 grind, there's a fair chance their super contributions are pretty seldom. By contributing into your partner's superannuation account, you could be eligible for a tax rebate.
The Criteria:
- You must be married or in a de facto relationship which includes same-sex couples and you must be living together
- Contributions must be after-tax (non-concessional)
- Both must be Australian residents
- The recipient must be under the age of 65, however, if they are aged between 65 and 69 they must meet work test requirements
- For the current financial year (2016-17), the receiving spouse’s income must be $10,800 or less for you to qualify for the full tax offset and less than $13,800 for you to receive a partial tax offset
The Benefits:
- You can claim an 18% tax offset for your after-tax contributions (capped at $540)
- To redeem the maximum $540 rebate you need to contribute a minimum of $3,000 into your partner's super fund
- If their income exceeds $10,800, you’re still eligible for a partial tax offset. However, once their income reaches $13,800, you’ll no longer be eligible, but you can still make contributions on their behalf
- Bear in mind, any contributions you make will count towards your partner’s non-concessional contributions cap. The current limit is $180,000 per year.
NB: From 1 July 2017 the government will increase access to the spouse contributions tax offset by raising the lower income threshold from $10,800 ($13,800 cut off) to $37,000 ($40,000 cut off). Another thing to be aware of is the reduction of the non-concessional contributions cap from $180,000 to $100,000 per year from 1 July 2017.
The Warnings:
- If either of you exceed the super cap limits, additional tax and penalties may apply
- The value of your's and your partner’s investment in super can fluctuate. Before making contributions, make sure you both understand the associated risks linked to your investment options
- Generally speaking, you’ll need to have reached your preservation age, which will be between 55 and 60 before you can access your super.
With the June 30 deadline looming, Sydney Financial Planning is here to help. It’s important that you talk to us about your situation so we can help you take full advantage of any opportunities.
Rules around spouse contributions can be complex so it’s a good idea to chat to us (9328 0876) to ensure the approach you and your partner take is the right one.
Are you set up to win?
For more help and to take a fresh look your current situation, speak to your financial planner. Book a meeting or contact us on 02 4229 8533.
Article by Bill Bracey - Principal & Senior Financial Planner
General Disclaimer: This article contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. Please seek personal financial advice prior to acting on this information.