In this article, we will be explaining spousal contributions.
Other ways to add to your spouse’s super include:
- Contribution splitting – splitting your own concessional contributions to your spouse’s super
- Concessional or non-concessional contribution from cash that you gave them to contribute themselves.
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What are spousal contributions?
Tax savings of spousal contributions
Spousal contributions vs Concessional contributions
Who is eligible for spousal contributions
How to make spousal contributions
How to claim the tax offset
What are spousal contributions?
If your partner’s income is below $40,000, you may be eligible for a tax offset of up to $540 if you make an after-tax (non-concessional) contribution into your spouse’s super. Not only does it boost your spouse’s super, but it lowers your income tax.
To be eligible for the full $540 offset, you need to contribute at least $3,000 to your spouse’s super, and your spouse must earn $37,000 p.a. or less.
You may still be eligible for a lower offset if you contribute less than $3,000 or if your spouse earns more than $37,000 pa but less than $40,000 pa.
Tax savings of spousal contributions
The tax offset amount reduces when your spouse’s income is over $37,000 and cuts out when your spouse’s income is $40,000.
The tax offset is 18% of the lesser of:
- $3,000 minus the amount by which your spouse’s income exceeds $37,000
- the sum of your spouse’s contributions in the income year.
| Partner’s income | Maximum possible offset |
Spousal contribution to get the maximum offset |
|---|---|---|
| $37,000 or less | $540 | $3,000 |
| $38,000 | $360 | $2,000 |
| $39,000 | $180 | $1,000 |
| $40,000 or more | $0 | $0 |
Spousal contributions vs Concessional contributions
Spousal contributions are non-concessional contributions, which means you do not get a tax deduction for spousal contributions. Instead, you get a tax offset. A tax offset is different to a tax deduction.
A tax deduction of $540 for someone on the 32.5% marginal tax rate means a tax savings of $540 x 32.5% = $175.50
A tax offset of $540 means you get a tax savings of the entire amount of $540.
As you are contributing $3,000 to get the full $540, your return is $540/($3,000 – $540) = 21.95%
In contrast, if you have not maxed out the concessional cap of the spouse with the higher personal tax rate, it is likely you’ll make a better gain from concessional contributions to the account of the person on the higher tax rate.
In the above, you have paid $3,000 and gotten $540 back in tax, so you have given up $2,460 of your post-tax income.
Let’s look at concessional contributions in comparison.
If you are on the 34.5% marginal tax rate (including the 2% Medicare levy), to give up $2,460 of your post-tax income (the same as with the spousal contribution, you would contribute $2,460/(100% – 34.5%) = $3,755.73
You get a tax deduction of 34.5% x $3,755.73 =$1,295.73 leaving you with giving up $2,460 of your post tax income.
Due to the 15% tax on concessional contributions, what ends up in super is $3,755.73 x 85% = $3,192.37
Your return is $3,192.37/$2,400 = 29.77%
So you gain a bigger benefit by contributing concessionally if you have that option.
And the benefit increases at higher marginal tax rates as follows:
| Spousal Contribution | Concessional Contribution @ MTR | |||
|---|---|---|---|---|
| 34.5% | 39% | 47%* | ||
| Contribution (C): | $3,000.00 | $3,755.73 | $4,032.79 | $4,641.51 |
| Personal Tax Savings (PTS): | $540.00 | $1,295.73 | $1,572.79 | $2,181.51 |
| Tax paid by super (ST): | $0.00 | $563.36 | $604.92 | $696.23 |
| Total post-tax amount paid (C – PTS): | $2,460.00 | $2,460.00 | $2,460.00 | $2,460.00 |
| Total ending up in super (C – ST): | $3,000.00 | $3,192.37 | $3,427.87 | $3,945.28 |
| Total benefit: | $540.00 | $732.37 | $967.87 | $1,485.28 |
| * If your income plus concessional contributions are over $250,000, div293 will reduce the benefit | ||||
If you’ve maxed out the concessional cap for the current financial year, you can also use unused concessional contributions for up to the past five years under the carry-forward rule, provided your total super balance on June 30 of the previous financial year was below $500,000.
You could then use contribution splitting to transfer this to your spouse’s super, which would help even up your super balances.
If you’ve maxed out the concessional cap for the person on the higher tax rate, as well as any unused concessional contributions from previous years, or if you are saving your concessional contributions for a lumpy tax bill like the sale of an investment property, you could consider contributing to the spouse on the lower tax rate.
To be eligible for the spousal contribution tax offset, you also must:
- Be either legally married or in a de-facto relationship
- Be living together on a permanent basis. You won’t qualify if you are a married couple living separately
- Not claim a tax-deduction on the contribution (i.e., not turn it from a non-concessional contribution into a concessional contribution).
And the spouse receiving the contribution must also:
- Be under 75 at the end of the financial year that you are making the contribution
- Have a total super balance below the $1.9 million Transfer Balance Cap on June 30 of the financial year prior to the year that you are contributing
- Not have exceeded their non-concessional contributions cap in the income year in which the contribution is made
- Not claim a tax-deduction on the contribution (i.e., not turn it from a non-concessional contribution into concessional contribution)
- both you and your spouse must be Australian residents when the contribution is made.
How to make spousal contributions
Check your spouses super fund for how to make spousal contributions. Some have their own BSB and account number to make the contribution to, which is different to the BSB and account number you use for your own concessional contributions. Others require you to fill out a form and send it with a cheque. After that is done, you will need to claim the tax offset in your tax return.
How to claim the tax offset
You claim the offset in your tax return as explained in this page:
T3 Superannuation contributions on behalf of your spouse