For many couples approaching midlife, building a secure retirement requires smart, coordinated planning. If your partner has spent time earning less—perhaps due to part-time work, a career change, or stepping back from full-time employment—their super may not have kept pace. By proactively boosting their super, you can not only help balance your retirement savings as a couple but also take advantage of valuable tax offsets that support your long-term financial strategy.
So let’s explore how the Spouse Contributions Tax Offset works and how it differs from Contribution Splitting.
The spouse’s contributions tax offset
Are you eligible?
To be entitled to the spouse’s contributions tax offset:
- You need to make a non-concessional contribution to your spouse’s super. This means you add money from your after-tax income and don’t claim a tax deduction for it.
- You must be married or in a de facto relationship together and not living apart or separately.
- You must both be Australian residents.
- Your spouse’s income should be $37,000 or less for the full tax offset, and under $40,000 for a partial tax offset (for the 24/25 financial year).
- Your spouse is under 75 years of age, and their total superannuation balance is less than the general transfer balance cap ($1,900,000 for 2024-25) as at 30 June of the prior year.
What are the financial benefits?
If eligible, you can generally contribute to your spouse’s super fund and claim an 18% tax offset in your tax return on the first $3,000 of contributions.
To be eligible for the maximum tax offset, which works out to be $540, you need to contribute a minimum of $3,000, and your partner’s annual income needs to be $37,000 or less. If their income exceeds $37,000, you’re still eligible for a partial offset. However, once their income reaches $40,000, they’ll no longer be eligible for any offset, but can still make contributions on their behalf.
Are there limits to what can be contributed?
You can’t contribute more than your partner’s non-concessional contributions cap, which is $120,000 per year for everyone, noting any non-concessional contributions your partner may have already made – but only if their total super balance was less than $1.9 million as at 30 June 2024.
However, suppose your partner is under 75 and eligible. In that case, they (or you) may be able to make up to three years of non-concessional contributions in a single income year under the bring-forward rules, which could allow a maximum contribution of up to $360,000. Please seek advice before using these bring-forward rules, as there are also restrictions on the ability to trigger bring-forward regulations for individuals with large super balances (more than $1.66 million in 2024-25).
How contributions splitting differs
Another way to increase your partner’s super is by splitting up to 85% of your concessional super contributions for the previous year with them. Concessional super contributions can include employer or salary-sacrifice contributions, as well as voluntary contributions for which you may have claimed a tax deduction.
What rules apply for contribution splitting?
To be eligible for contribution splitting, your partner must be between the ages of 60 (preservation age) and 65 (and not retired).
You must give your fund the notice of intent to claim a deduction before applying to split the contributions.
Are there limits to the amount that can be contributed?
Amounts you split from your super into your partner’s super will count toward your concessional contributions cap, which is $30,000 per year for everyone unless eligible to use carry forward contributions cap amounts accrued in the last 5 years if they’re eligible. (For example, their total super balance was less than $500,000 on 30 June of the previous financial year.)
Do all super funds allow for this type of arrangement?
You’ll need to contact your super fund to determine whether it offers contribution splitting, and it’s also worth inquiring about any associated fees.
What else should you and your partner be aware of?
- A contribution split with your spouse is called a ‘contributions-splitting super benefit’ and is treated as a rollover to your spouse, not a new contribution for them.
- Accordingly, splitting your contributions with your spouse does not reduce the total contributions made for you or change their characteristics for your contribution caps. For example, if you make a personal contribution and claim a tax deduction for it, that will count towards your concessional contributions cap for the year, even if you then split and roll it over to your spouse. It will not count towards your spouse’s cap.
- If either of you exceeds super contribution caps, additional tax and penalties may apply.
- The value of your partner’s investment in super, like yours, can fluctuate, so before making contributions, ensure you both understand any potential risks.
- The government sets rules about when you can access your super. Generally, you can access it when you’ve reached age 60 (preservation age) and retire. This means that splitting contributions with an older spouse should result in the funds being accessible earlier (but be careful to ensure that the younger person still has good retirement savings in their super fund to last all of their retirement, too!)
- If you are going to be close to or exceed the Total Super Balance cap before you expect to retire, then transferring some of your super contributions to your spouse’s account now/regularly may help you both stay under the cap.
Where to go for more information
Your circumstances and financial goals will play a big part in what you both decide to do. And, as the rules around spouse contributions and contributions splitting can be complex, it’s a good idea to chat to one of our Everalls Wealth Financial Advisers to make sure the approach you and your partner take is the right one.
Source: AMP
