Spouse contributions & contribution splitting
Read about the potential tax benefits of making super contributions to your spouse’s super, or splitting certain contributions that have been made to your own account.
A spouse contribution is an after-tax (voluntary) contribution made to your spouse’s super account. Spouse contributions build up your super as a couple and can be tax-effective. By making a contribution to your spouse’s super, not only are you helping them – if your partner earns less than $40,000 a year you could be eligible for a tax offset (up to $540). It’s a great way to make sure that one partner’s super doesn’t suffer if they are working reduced hours, on parental leave, or unable to work.
How to make a spouse contribution
Your spouse will need to be a legalsuper member before they can receive contributions made by you. You must complete and return Spouse Contribution form to legalsuper with each spouse contribution made:
How to make a spouse contribution
Your spouse will need to be a legalsuper member before they can receive contributions made by you. You must complete and return Spouse Contribution Form to legalsuper with each spouse contribution made.
Claiming a tax offset for a spouse contribution
A tax offset of up to $540 may be available for up to $3,000 of superannuation contributions made by a taxpayer on behalf of a non-working or low-income spouse. The spouse contributions offset cannot be claimed for contributions split from your account to your spouse’s account. The offset can be claimed through the completion of the T3 section of your tax return. For more information, refer to the Australian Taxation Office.
Not everyone is eligible to make a spouse contribution or to receive the tax offset. To be entitled to the spouse contributions tax offset. The basic criteria is:
- you must make a contribution to your spouse’s super using after-tax dollars, which you haven’t claimed as a tax deduction
- you must be married or in a de facto relationship
- you must both be Australian residents
- the receiving spouse has to be under the age of 67 (or if they’re between 67 and 74 they must meet work test requirements, )
- the receiving spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.
Contribution splitting allows you to split certain before-tax (concessional) contributions with your spouse. This strategy can help balance your super accounts to keep on track for retirement and make your savings more tax-effective.
Contribution splitting involves transferring before-tax contributions (such as employer Super Guarantee payments, salary sacrifice or personal deductible contributions) to your spouse's super account. This can be particularly beneficial for higher-income earners and pre-retirement couples where one spouse's super account balance is expected to exceed $1.6 million.
Contribution splitting does not reduce the amount counted towards your concessional contributions cap.
How to split your contributions with your spouse
Review your splittable contributions and read the below information before applying to split your contributions, then complete and return the Contribution Splitting Application form to legalsuper.
Benefits of contribution splitting
Some of the benefits of splitting contributions with your spouse include:
- Earlier access to tax-free super benefits
Splitting contributions could allow super money to be accessed tax-free and earlier than what might otherwise be possible if they remained in the contributing spouse’s fund. For example, a member aged 54 might split contributions with their spouse aged 60. If the 60-year-old spouse has retired, they are eligible to withdraw their super as a tax-free lump sum, unlike the younger spouse.
- Improve Centrelink/Age Pension position
Splitting contributions may increase pension entitlements, as super assets of a younger spouse may not be assessed when in accumulation phase while they are under Age/Service Pension age.
- Total Super Balance (TSB) limits
Your TSB is the total amount an individual has in superannuation and super-related assets. If your TSB was $1.6 million or more on 30 June of the preceding financial year, you can't make after-tax contributions to your super. Contribution splitting can help even out two accounts, so both partners can take advantage of opportunities to contribute to super.
- Pension transfer balance (TBC) cap
The TBC limits how much you can transfer to a retirement/pension account. $1.6 million the total amount of super that an individual can transfer into tax-free retirement phase. By using contribution splitting, superannuation balances can proactively be evened up between members of a couple, meaning that a greater percentage of wealth in retirement can be held in the tax-free pension environment.
- Estate planning
It may bring you peace of mind to know that your spouse has funds prepared for retirement if you were to pass away unexpectedly.
- Insurance payments
Contribution splitting can help cover the cost of insurances.
When to split your contributions
You can apply to split your contributions when you're any age, however, your spouse must be either:
- less than their preservation age; or
- aged between their preservation age and 74 years, and not retired.
You must lodge an application with legalsuper:
- in the financial year immediately after the financial year in which the contributions were made; or
- in the financial year the contributions were made, only if your entire benefit is being withdrawn before the end of that financial year (as a rollover, transfer to an income stream, lump-sum benefit or any combination of these.)
For example, if you are applying in the 2020/21 financial year, the super contributions to be split must have been made on or after 1 July 2019.