Super strategies – Boost your spouse’s super and reduce your tax

Making an after-tax contribution into your spouse’s super could benefit you both – by increasing your spouse’s super and potentially reducing your tax.

 

How does the strategy work?

Other key considerations
If you make an after-tax contribution into your spouse’s super account and they earn less than $40,000 pa, you may be eligible for a tax offset of up to $540.

This strategy could be a great way to grow your super as a couple. Not only could you boost your spouse’s super, the tax offset could help reduce your income tax.

To qualify for the full offset of $540 in 2020/21, you need to contribute $3,000 or more into your spouse’s super and your spouse must earn¹ $37,000 pa or less.

A lower tax offset may be available if you contribute less than $3,000 or your spouse earns more than $37,000 pa but less than $40,000 pa.
  • To use this strategy, the spouse who receives the contribution must:
    • be under age 67, or meet a ‘work test’ if between age 67² and 74
    • have a ‘total super balance’ of less than $1.6 million on 30 June of the previous financial year, and
    • not exceed their ‘non-concessional contribution cap’, which in 2020/21 is generally $100,000, or up to $300,000 in certain circumstances.
  • Super can’t be accessed until you meet a ‘condition of release’. For more information, please visit the ATO website at ato.gov.au.
  • There are some other super strategies that may benefit you as a couple (see back page).

 

Case Study

Phil and Karen are married and have two young children. Phil works full-time and earns $100,000 pa.

Karen has cut back to working two days a week and earns $32,000 pa.

They want to make sure Karen keeps building her super while she is working part-time. Previously, when she was working five days a week, the super contributions from her employer were higher.

Phil contributes $3,000 into Karen’s super account. This entitles him to a tax offset of $540, which will reduce his income tax when he completes his 2020/21 tax return.

 

 

Seek Advice

Your financial adviser can help you determine whether spouse contributions suit your needs and circumstances.

¹ Includes assessable income, reportable fringe benefits and reportable employer super contributions.

² From 1 July 2019, individuals who do not meet the “work test” may be able to use the one-off work test exemption if certain requirements are met.

 

Source: MLC Limited

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