Did you know that you may be able to make spouse contribution on behalf of your spouse into their superannuation fund? Additionally, if your spouse is not working or is a low-income earner, as the contributing partner, you may be able to claim a tax offset.
The following are the conditions that must be met before your making additional superannuation spouse contributions.
- You must be legally married to the person making the contribution or living with that person on a bona fide domestic relationship (same sex couples are excluded). You must not live separately or apart from the taxpayer on a permanent basis, even though legally married to the taxpayer; and
- Must be under age 65; or
- Aged between 65 and 70 and gainfully employed on at least a part-time basis (minimum of 40 hours of gainful employment in a consecutive period of not less than 30 days in the financial year in which the contribution is made)
- The super fund receiving the contribution must have details of the spouse's Tax File Number.
Advantages in making a spouse superannuation contribution
A tax offset of 18% is available where your spouse's assessable income is $10,800 or less with the maximum offset of $540 available. Where the spouse's assessable income is above $10,800, the offset is calculated on the lesser of $3,000 reduced by $1 for every dollar that your spouse's income exceeds $10,800 Or the amount of the spouses contribution. This means that the offset phases out where the recipient spouse's income is $13,800 or more.
In addition to the possible tax benefit, other advantages of making spouse superannuation contributions include:
- It may be a tax effective method of splitting assets.
- The ability to fund life cover for the spouse through superannuation.
- Investing in a concessionally taxed environment (generally a maximum of tax 15% applies to earnings in super as opposed to the investor's marginal tax rate).
The future advantages of contributing for the spouse are:
- Building a large amount of non-concessional contributions which are tax free if cashed or paid as income from an income stream. Investment earnings received during the accumulation phase of super are taxed and form a taxable component in the fund.
- The taxable portion of an income stream is subject to a 15% tax offset if paid to recipient aged between 55 and 59 (inclusive).
- The accumulated super savings can be in a tax-free environment when an income stream is commenced. A complying superannuation fund is generally entitled to a tax exemption for so much of its income as is attributable to its liability to pay current income stream payments
How is the spouse's superannuation contributions taxed?
Your eligible spouse contributions made to your spouse's superannuation account are treated as a tax free component in superannuation funds. This means that they are not subject to the tax that applies to certain superannuation contributions. Therefore, the full value of the contribution (less any fees) is invested for your spouse's retirement. When contributions are eligible to be withdrawn from your spouse's superannuation fund (generally retirement), they form part of the tax free component of a super lump sum payment. These amounts are not included in your spouse's assessable income and received tax-free.
Is there a limit on the amount of superannuation contributions I can make on behalf of my spouse?
No. There is no limit on the amount of money that you can invest in your spouse's superannuation account. While the tax offset is calculated on sums of $3,000 or less, you may contribute more than this if you wish. Spouse contributions are non-concessional contributions and as such are subject to the non-concessional cap that applies (currently $150,000 per annum). Non-concessional contributions up to the cap will not be taxed within the fund. If non-concessional contributions exceed the cap, the excess amount will be taxed at the highest marginal tax rate (plus Medicare Levy). In certain circumstances, the averaging rules may be utilised which allow up to $450,000 of non-concessional contributions to be made in a financial year. You should discuss your eligibility with your adviser.
When can monies from superannuation be accessed?
Spouse contributions are preserved within super. This means the capital is not accessible until a condition of release is satisfied. A condition of release is a trigger which allows access to super money. Generally this is retirement after reaching preservation age (currently age 55 for those born before 1/7/60). If you have never been gainfully employed then your super money cannot be accessed until age 65.
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