Why you should consider topping up your spouse's super

There are many reasons why one person in a relationship may have a lower super balance than the other. Salary, length of time in the workforce and time spent caring for others (such as young children and elderly parents), are all contributing factors that can impact your balance over time.

If your partner's super balance is lower than yours, you can both benefit from topping up their super.

Not only will you be helping to secure their financial future, you can potentially increase your eligibility for government concessions, improve your overall retirement savings and save tax.

Age pension benefits

One of the many benefits of topping up your spouse's super includes qualifying for a higher rate of the Centrelink Age Pension if you have a spouse under the Age Pension age (currently age 66.5).

For example, if your partner is 61 and you're 67, provided your partner is in the accumulation phase, you can transfer some of your super or your savings into their superannuation account.

Because your partner's super will be exempt from the income and asset test, it could mean that you qualify for a higher pension rate.

Access super sooner

If you have an older spouse, once they reach age 60 or over and have met a condition of release (such as retirement), they are generally able to draw down tax-free lump sums or commence a tax-free pension from super.

By moving money into an older spouse's super account, this could give you access to tax-free lump sums much sooner.

More money in the tax-free pension environment 

If you have a large super balance, a benefit of moving money into your spouse's super is the ability to have more money in the tax-free pension environment at retirement.

The transfer balance cap (currently $1.7 million) limits the amount that can be transferred into a tax-free pension.

If your super is over the transfer balance cap, moving money into your spouse's superannuation account may allow you to utilise more of their transfer balance cap, resulting in more super in tax-free pensions.

Ways to top-up your spouse's super

There are three main ways to boost your spouse's super: personal contributions, spouse contributions and splitting contributions.

Here's a quick reminder on concessional and non-concessional contributions and their associated caps.

• Concessional contributions are made before tax and include the super paid by your employer, salary sacrifice amounts and personal contributions where you claim a tax deduction. The yearly cap for concessional contributions is currently $27,500. Depending on your situation, a higher cap may apply if you have eligible unused amounts from previous income years.
• Non-concessional contributions are made from after-tax dollars. The current yearly cap is $110,000 for most people.  However, you may be able to make additional contributions by utilising the 'bring forward rule', which allows you to contribute up to $330,000 over a three-year period.

Personal contributions

Your spouse can make a personal contribution (either concessional or non-concessional) into their own super account to boost their balance. Depending on their situation, this could qualify them for a tax-deduction (subject to a work test if aged 67 to 74), or a Government co-contribution of up to $500.

In order to make most types of personal contributions, your spouse must be under age 75.

Spouse contributions

You can also make a spouse contribution directly into their super account. As this is considered an after-tax non-concessional contribution, it will count towards their non-concessional annual cap ($110,000 for most people).

The contributing spouse can be of any age, however, the receiving spouse must be under the age of 75.

A spouse contribution may entitle you to a tax offset which reduces the tax you pay on your own taxable income.

If you are married or in a de facto relationship, you are eligible to claim a tax offset of up to $540 if your spouse:

• has an assessable income (including fringe benefits and employer super contributions for the financial year) of less than $40,000 p.a.;
• has not exceeded their non-concessional cap; and
• has a total super balance at June 30 of the previous financial year of less than $1.7 million.

To be eligible for the maximum tax offset of $540, a spouse contribution of at least $3000 must be made and the receiving spouse's income must be below $37,000. Where the receiving spouse's income is between $37,000 and $40,000, the tax offset is reduced.

Split concessional contributions

You can also split concessional contributions with your partner. Eligible contributions include the Superannuation Guarantee, salary sacrifice and any personal contributions for which you claim a tax deduction.

The maximum amount you can split to your spouse's account is generally 85% of your concessional contributions. To be eligible, your spouse must be:

• under preservation age (between 55 and 60 depending on their date of birth); or
• between preservation age and age 64, and declare they do not satisfy the retirement condition of release.

You'll need to apply to split contributions after the end of the financial year in which the contribution was made into your own super, i.e. contributions made between July 1, 2021, and June 30, 2022, can be split from July 1, 2022, until June 30, 2023.

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