Many are not aware that they can contribute to their spouse’s superannuation balance. This is actually a smart tax strategy for people who plan to retire before the age of 60. Split contributions can be made regardless of your age, but your spouse must be under preservation age or between preservation age and 65 and not retired.
Split Contribution Guidelines
If your spouse meets the eligibility requirements, you are allowed to split up to 85% of your before-tax contribution. This includes personal contributions that are claimed as a tax deduction (often made by self-employed individuals) as well as employer Superannuation Guarantee and salary sacrifice contributions.
Split contributions still count towards your limits and not your spouse’s. Tax is also deducted from contributions prior to splitting. There are two instances when you are not permitted to split contributions:
- When your account totals less than $1,000
- When your account falls under $1,000 if your contribution is split
- When you request to split an amount that’s under $1,000
Benefits of Split Contributions
If your spouse makes up to $37,000, you can contribute to their super account and receive an 18% tax offset of up to $540. There are also other benefits to split contributions that can help you and your spouse achieve your financial goals. They include:
- A younger spouse can contribute to increase the pool of funds available to their partner once the partner is eligible to access benefits.
- A partner that earns a much higher income can split contributions so that a lower tax rate is applied based on their spouse’s earnings.
How to Contribute to Your Spouse’s Superannuation Balance
If you want to begin split contributions, the first step is to complete a Superannuation contributions splitting application provided by the Australian Taxation Office. Applicants must check to make sure their fund allows contribution splitting, doesn’t require a different application form, and verify whether or not any fees will be applied for splitting.
Make sure you understand eligibility and limitations with the advice of a seasoned professional. A licensed accountant can help you navigate Australian tax law to determine whether you and your spouse can take advantage of the co-contribution scheme. If you have questions or want to begin contributing to your spouse’s superannuation balance, contact BIS Cosgrove. Brian and our team of experts will help you make the best decisions for your retirement.