To invest in a tax-effective income stream, such as an allocated pension, you need superannuation money.

So putting additional money into super before you retire, opens up some powerful financial planning opportunities.

But what if you're no longer eligible to contribute to superannuation in your own right (i.e. you are over 65 and no longer working, or you are under 65 but haven't worked in the last two years)?

If you have a spouse there are strategy options available. Changes to the superannuation rules mean that you can contribute to a super fund on behalf of a working or non-working spouse - provided the receiving spouse is under age 65.

How does the strategy work?

You can make contributions into a superannuation account created for your spouse, even when you are no longer eligible to make contributions in your own account. You can even redeem investments held outside of super (such as term deposits) and reinvest the proceeds in your spouse's account.

There is no limit to the amount you can contribute on behalf of your spouse, and you may also be eligible to claim tax offset of up to $540 on the first $3,000 you contribute.

Spouse contributions are classified as undeducted contributions, which means they form part of the "deductible amount" if you use them to purchase a retirement income stream. The deductible amount is extremely beneficial as it is returned to your spouse tax-exempt over the life of the income stream.

By taking advantage of the spouse super strategy, a tax-effective income stream can be purchased with the income payments made to your spouse.

The Benefits

By allowing you and your spouse to purchase a tax-effective income stream, this strategy can effectively double the tax advantages of superannuation:

•  The investment earnings of income streams purchased in either name is tax-free in the hands of the income stream providers.

•  You and your spouse may both be eligible for a 15% tax offset on taxable income payments from your income streams (providing the income streams were not purchased with benefits in excess of your available RBL).

•  On lump sum withdrawal, both spouses can utilise the tax-free threshold on the post-June '83 component.

In addition, by converting money held outside of super into an income stream investment, you and your spouse might also qualify for a more favourable social security assessment .