As an Australian taxpayer, you have the opportunity to leverage the spouse contribution tax offset to support your partner’s superannuation savings. By making eligible super contributions on behalf of your spouse, you can claim a tax offset, which can provide financial benefits for both of you. This comprehensive guide will walk you through the details of the spouse contribution tax offset, its eligibility criteria, income and balance caps, and how you can maximize its benefits.
IN THIS ARTICLE
- Tax Offset Amount
- Eligibility Criteria
- Income and Balance Caps
- Calculating the Tax Offset Amount
- Spouse Contributions and Contribution Splitting
- Eligibility for Spouse Contributions
The spouse contribution tax offset allows you to claim a tax benefit when you make eligible super contributions to your spouse’s complying super fund or retirement savings account (RSA). To qualify for this tax offset, your spouse needs to earn under $40,000 per year or not work at all.
Tax Offset Amount
The tax offset amount depends on the contribution amount and your spouse’s income. If you pay $3,000 or more and your spouse earns $37,000 or less, you can claim the full tax offset of $540. For contributions less than $3,000, and if your spouse earns between $37,000 and $40,000, you can claim a partial tax offset.
To be eligible for the spouse contribution tax offset, you must meet the following conditions for the income year in which you make the claim:
- Contributions made to a complying super fund.
- Both you and your spouse were Australian residents.
- The contributions were not deductible by you.
- You and your spouse were not living separately and apart on a permanent basis.
- Your spouse’s age should be under 75 years (from 1 July 2020) or 70 years (for earlier income years).
- Your total super balance should not exceed the general transfer balance cap, which is $1.9 million from 1 July 2023.
Income and Balance Caps
For the spouse contribution tax offset, your spouse’s income must be less than $40,000 for the relevant income year. The income includes their assessable income, total reportable fringe benefits amounts, and total reportable employer superannuation contributions.
Calculating the Tax Offset Amount
The tax offset amount is determined using specific worksheets, which consider your spouse’s income and the contribution amount. If your spouse’s income is $37,000 or less, Worksheet 2 is used to calculate the offset. If their income is between $37,000 and $40,000, Worksheet 3 is employed. The calculations involve comparing the spouse contributions, income thresholds, and other factors to determine the offset amount.
Spouse Contributions and Contribution Splitting
To ensure your spouse’s superannuation continues to grow, you have two options: making spouse contributions and arranging for contribution splitting.
You can make voluntary after-tax contributions into your spouse’s super fund if they are a low-income earner or have taken time off for caring responsibilities. These contributions may qualify for the spouse contribution tax offset, providing a tax benefit of up to 18% for contributions up to $3,000 per year. The maximum tax offset of $540 can be claimed if your spouse’s total assessable income is $37,000 or less.
Contribution splitting allows you to direct some of your employer or voluntary personal contributions into your spouse’s super account. This option is available if your spouse is under their preservation age or between 65 and their preservation age and has not yet retired. Contribution splitting is facilitated through your super fund, and it enables you to transfer up to 85% of your concessional contributions from the previous year.
Eligibility for Spouse Contributions
To qualify for the spouse contribution tax offset, your partner must be your legally married or de facto partner. However, if you are legally married but live separately and apart on a permanent basis, your spouse may not be considered eligible under the superannuation laws. Additionally, your partner must be younger than their preservation age or between 65 and their preservation age and not yet retired.
The spouse contribution tax offset offers Australian taxpayers an excellent opportunity to support their partner’s superannuation savings while enjoying potential tax benefits. By making eligible contributions and meeting the necessary criteria, you can claim a tax offset of up to $540. Whether you opt for spouse contributions or contribution splitting, it’s crucial to understand the income and balance caps, as well as the calculations involved. Take advantage of this valuable tax offset to help secure a better financial future for both you and your spouse. And If you’re ever in doubt what do do, ask for the help of tax experts.
This article is for general information only. It does not make recommendations nor does it provide advice to address your personal circumstances. To make an informed decision, always contact a registered tax professional.