If your spouse is a low income earner, you may be eligible for an 18% tax offset by making an eligible spouse contribution to super on their behalf.
The tax offset is only payable in full where the spouse receiving the contribution has assessable income plus reportable fringe benefits and reportable employer superannuation contributions (these are basically employer superannuation contributions in excess of the Superannuation Guarantee amount) totalling less than $37,000. The offset is then 18% on the first $3,000 of contributions (ie. a maximum offset of $540).
The tax offset amount reduces when your spouse’s income is greater than $37,000 and completely phases out when your spouse’s income reaches $40,000.
An eligible spouse contribution is simply a situation where a person makes a superannuation contribution on behalf of their spouse. There are rules on when a person can make an eligible spouse contribution and also who can be classified as an ‘eligible spouse’.
The spouse making the contribution can be any age, not necessarily employed, however, for the purposes of claiming a tax offset both spouses must be Australian residents at the time the contribution is made. The spouse receiving the contribution need not be working if they are under age 65, however, they must have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which the contribution is made if they are between age 65 and less than 70.
An eligible spouse includes a legal spouse and a defacto spouse but does not include someone who lives separately and apart from the person on a permanent basis at the time the contribution is made.
Spouse contributions are counted towards the non-concessional contributions cap and are included in the calculation of the tax-free component in a superannuation benefit paid out. The contributions are preserved until the spouse is in a position to redeem their superannuation benefits, ie usually retirement from the workforce after their preservation age (between age 55 and 60, depending on their date of birth).
For many, the opportunity to split assets and income between a couple, delivering a tax effective income stream in retirement, has made spouse contributions a very popular financial planning strategy.