You might be in a position where your partner is a stay-at-home parent or working part-time. If your partner is a low-income earner or doesn’t work at all, making contributions to their super can be a smart financial move. Not only will you be growing your super together, but you may also be able to take advantage of a tax offset and maximise the amount you can hold across both super funds.
We’ve put together a guide to everything you need to know about making contributions to your partner’s super.
What are my options for making contributions to my partner’s super?
You have two options when it comes to making contributions to your partner’s super: personal spouse contributions and contributions splitting. Let’s explore each one in more depth.
You can boost your partner’s super by making personal contributions on their behalf. These are considered after-tax (or non-concessional) contributions, meaning they count towards your partner’s non-concessional contributions cap.
Making personal spouse super contributions allows you to claim a tax offset of up to $540. In order to receive the highest amount of tax offset, you’ll need to contribute at least $3,000 and your partner’s income must be less than $37,000 per year. If you contribute more than $3,000, you’ll still receive the maximum tax offset of $540. If they earn between $37,000 and $40,000 per year, the tax offset amount is reduced. If they earn more than $40,000 per year, you won’t receive a spouse contribution tax offset.
Am I eligible to make spouse contributions?
If you decide to make personal spouse super contributions, you and your partner will need to meet a few eligibility criteria:
- Contributions must come out of your income that has already been taxed
- The contribution needs to be paid into your partner’s super fund or retirement savings account
- You both need to be Australian residents
- You must be in a de facto relationship or married, and be living together on a permanent basis (including same-sex couples)
- Your partner must be under 67 or if they’re 67 or older and less than 75, they’ll need to meet the work test requirements (this involves proving they worked at least 40 hours over a period of no more than 30 consecutive days in the financial year).
What are the benefits of making spouse super contributions?
There are several advantages to making spouse contributions. The main benefits include:
- Both you and your partner are more financially prepared for retirement
- You can claim a tax offset of up to $540
- Spouse super contributions won’t be taxed, just as long as they don’t go over the non-concessional contributions cap
Are there any limitations to making spouse super contributions?
Currently, the non-concessional contributions cap is set at $100,000. Basically, this means you and your partner can only make personal contributions up to a total of $100,000 per year to your partner’s super fund without exceeding the cap if your partner is under 65, you and your partner may contribute up to a total of three times the amount, bringing forward up to two years worth of non-concessional caps depending on your partner's total superannuation balance. If contributions go over these limits, your partner may be taxed on associated earnings or if the excess is not released from super, it is taxed at the highest marginal tax rate.
It’s also worth noting that in order to receive the tax offset, your partner can’t exceed their non-concessional contributions cap for the financial year, nor can their super balance be $1.6 million or more on June 30 of the last financial year.
How do you make super contributions for your partner?
Making contributions for your partner is relatively straightforward. If your partner hasn’t already done so, they’ll need to complete an ANZ Smart Choice Super application to open an account. Once that’s up and running, you can make contributions to their super using BPAY. If you need any assistance making contributions to your partner’s super, call us on 13 12 87.
Contributions splitting is another way to grow your partner’s super. Not only does it help boost the amount sitting in your partner’s super account, but it can also benefit you if your super balance is set to exceed the individual limit.
You can split up to 85% of your before-tax (or concessional) super contributions with your partner. Before-tax contributions include superannuation contributions made by your employer, as well as salary sacrifice contributions. They can also cover any voluntary superannuation contributions you’ve claimed as a tax deduction.
How do I know if I’m eligible for spouse super contributions splitting?
If you opt for contributions splitting, generally it must be done after the end of a financial year. Your partner must also be less than their preservation age (usually between 55 and 60, depending on when they were born), or attained their preservation age but younger than 65 and not retired.
What are the benefits of contributions splitting?
Super contributions splitting offers a few key benefits, including:
- In retirement you can hold a higher tax-free amount across both super funds. If you’re a high-income earner and your super balance is likely to hit the $1.6 million tax-free limit, contributions splitting can increase the amount that you can hold as a couple. Effectively, you can hold up to $3.2 million across both super funds completely tax-free.
- If born before 1 July 1964 and are eligible to withdraw a superannuation lump sum, you’ll maximise the tax-free amount that you can withdraw from your super funds before you turn 60. Before 60, you can only withdraw taxable component up to $215,000 tax-free in the 2020/2021 financial year. If both of you have sufficient balances in your super funds, you can withdraw $300,000 tax-free.
- If your partner is younger than you, you can reduce the assets that can be assessed by Centrelink’s means test. Money sitting in superannuation isn’t counted towards the means test until the owner reaches Age Pension age or starts a pension, which may increase your Centrelink entitlements.
Are there any limits to contributions splitting?
You can split up to $21,250 concessional contributions per year to your partner’s super fund (85% of $25,000 or more if you are eligible to use unused concessional contribution caps from 2018-19 and 2019-20 financial years). Just note that any amounts that you decide to split to your partner’s super fund will actually be counted towards your concessional contributions cap of $25,000 per year, not theirs.
How can I set up contributions splitting?
If you already hold an ANZ Smart Choice Super account and you’d like to set up contributions splitting, you can easily do so. You simply need to download the form here or from the ATO and fill out a few details. If you need any assistance with setting up super contributions splitting, you can call us on 13 12 87
What else should I know about spouse super contributions?
There are a few things to keep in mind if you want to make contributions to your partner’s super:
- Familiarise yourself with the tax rates that may apply if you make contributions over the concessional and non-concessional caps. Any associated earnings relating to excess non-concessional contributions will be added to your income tax return and taxed at your marginal tax rate, which could be up to 47%. If excess non-concessional contributions are not released these are taxed at 47%. Excess concessional contributions are tax to you.
- Make sure you’re both aware of the government rules around when you can access your super. Generally speaking, you can access your super once you’ve retired and reached preservation age (this is usually between 55 and 60, depending on when you were born), or once you’ve reached 65.
- If you haven’t already, you may wish to consolidate your super accounts, based on your personal circumstances. Not only will this save you money on fees, but it will also make managing your and your partner’s super funds much easier, as you’ll only have two accounts to look after.
- Sit down with your partner and look at your finances together to figure out your superannuation goals. Ensure you’re making spouse contributions that will help meet your shared target and cover both of your expenses throughout retirement.
- If you want assistance with working out a plan for your retirement, you can chat to a financial planner. They can help you optimise your super contributions strategy to ensure you make the most of tax offsets and tax-free thresholds.
- To make a spouse contribution or split contributions with your partner, you must be legally married or in a de facto relationship, living together on a permanent basis (including same-sex couples).
Where can I get more information on superannuation?
For more information on making spouse super contributions or superannuation in general, you can get in touch with ANZ.
ANZ Smart Choice Super makes it easy to manage your and your partner’s super and to contribute to both funds. You can make payments to your partner’s super online and through the ANZ app, and you can take advantage of low fees and the ability to bundle your banking and super accounts. For more information on ANZ Smart Choice Super, click here.