Spouse Super Contributions & The Tax Offset: Your Guide

You love your spouse. And, even if you don’t, well… Till death do you part. Either way, you should be considering the benefits of spouse super contributions.

Spouse Super Contributions

Making contributions into your spouse’s superannuation account can be done for a number of reasons. Sometimes, spouse contributions are made to equalise superannuation balances or reduce the assessable assets for Centrelink purposes. But, the most common reason to make a spouse contribution is for the spouse contribution tax offset.

What is the Spouse Contribution Tax Offset?

A spouse contribution tax offset is a personal tax offset received for making a contribution into your spouse’s superannuation account.

The tax offset you receive for making the contribution can be as high as $540 each financial year.

Spouse Contribution Tax Offset Eligibility

Certain rules and conditions need to be met to be eligible for the spouse contribution tax offset. These include:

• Your spouse’s income, including reportable fringe benefits and reportable super contributions, cannot exceed $40,000;
• The contribution you make into your spouse’s account must be a non-concessional contribution (after-tax contribution);
• You and your spouse need to be Australian residents when the contribution is made;
• You and your spouse cannot be living separately on a permanent basis when the contribution is made;
• You need to ensure your spouse has not exceeded their non-concessional contribution cap and does not have a total super balance in excess of the $1.9 million transfer balance cap; and
• Your spouse needs to be under age 75 when the contribution is made.

Spouse Contribution Calculation

The maximum spouse contribution tax offset of $540 is available to you if your spouse’s income is $37,000 or less. The tax offset then completely phases out once your spouse’s income reaches $40,000 for the year.

The tax offset is calculated as 18% of the lesser of:

• $3,000, reduced by $1 for every $1 of the spouse’s income that exceeds $37,000; and
• The total value of the spouse contributions for the year

This video shows you how the Spouse Contribution Tax Offset works:

Spouse Contribution Tax Offset Example

Pepe and Rose are married. Pepe earns $80,000 per year and Rose earns $34,000 per year. Pepe contributes $5,000 into Rose’s super account. Pepe can claim a tax offset equal to 18% of the lesser of:

• $3,000, reduced by $1 for every dollar that Rose’s income exceeds $37,000; and
• The total value of the spouse contributions for the year.

So, to calculate this, it is the lesser of:

• 18% x ($3,000 – $0) = $540; and
• 18% x $5,000 = $900

As $540 is the lesser amount, then that is what can be claimed as a tax offset by Pepe.

If Rose earned $38,000 for the year and Pepe only contributed $3,500 into her account as a spouse contribution, then the calculation would be the lesser of:

• 18% x ($3,500 – $1,000) = $450; and
• 18% x $3,500 = $630

As $450 is the lesser amount, then that is what can be claimed as a tax offset by Pepe.

Is a Spouse Super Contribution Tax Deductible?

If you wish to claim the spouse contribution tax offset, the contribution made into your spouse’s account must be a non-concessional contribution which, by definition, is a contribution made to super where a tax deduction has not been claimed in respect of the contribution. Further, there is no instance where you can claim a tax deduction for a contribution made into a spouse’s super account. You can only claim a tax deduction for contributions made into your own account, if eligible. Therefore, you cannot claim a tax deduction for a spouse contribution.

Being non-concessional contributions, spouse contributions will not incur contributions tax.

How to Claim the Spouse Contribution Tax Offset

To claim the spouse contribution tax offset, you need to make a non-concessional contribution into your spouse’s super account. A spouse includes someone you are in a de-facto relationship with.

The spouse contribution does not need to be made from a personal bank account owned in your name only. Any non-concessional contributions made into your spouse’s super account can be used to calculate the spouse contribution tax offset, regardless of the source of the contribution.

To claim the spouse contribution tax offset, you simply need to note on your individual tax return that you made a non-concessional contribution into your spouse’s account and nominate the amount made. The offset amount will then be calculated based on your spouse’s income and the contribution amount.

A spouse contribution tax offset strategy can be very beneficial. A tax offset is not a tax deduction that merely reduces assessable income, it is an offset against the amount calculated as your tax payable, so it is just like receiving $540 in-the-hand. This is one of a handful of retirement planning strategies that can help you save towards retirement.

The spouse contribution tax offset can be made in addition to a super co-contribution strategy and any other types of voluntary concessional or non-concessional contributions.

Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.