Contribute for your spouse and save on tax

Contributing to super on behalf of your spouse is one of the most tax-effective ways for a couple to generate a retirement nest egg. It allows both of you to contribute to superannuation and can result in considerable tax savings. It is especially effective when it comes time to purchase a tax-effective retirement income stream, such as an allocated pension.

For the purposes of this strategy, a 'spouse' under relevant legislation includes married and defacto spouses but does not include a partner who lives in a different home or a same sex defacto spouse.

Some people start making superannuation contributions for their spouse just before they retire. This ignores the benefits of making after-tax spouse contributions on a regular basis. While the main advantage of the spouse super strategy is to enable each partner to purchase an income stream in retirement and qualify for concessional tax treatment, this strategy can also help you qualify for a tax rebate of up to $540 each year.

How does the strategy work?

To use this strategy, your spouse must be under age 65 (or aged between 65 and 70 and working at least 10 hours per week). To qualify for the full rebate, your spouse must also have earned less than $10,800 in the financial year in which you contributed on their behalf (or between $10,800 and $13,800 for a partial rebate).

There is no limit to the amount you can contribute on behalf of your spouse. However, the rebate is limited to 18% of the first $3,000 contributed each year (i.e. a maximum of $540).

Regardless of whether or not you qualify for a tax rebate, spouse contributions can significantly increase your long term retirement savings (and hence the amount available to purchase an income stream) - particularly when compared to non-superannuation investments that are taxed at your spouse's marginal tax rate.

The Benefits

• You can earn a tax rebate of up to $540 each year simply by making superannuation contributions on behalf of your low income or non-working spouse.
• Spouse contributions are undeducted contributions and do not attract tax on withdrawal.
• With spouse super, you can effectively double the tax advantages that the super system has to offer:
• - both you and your spouse will pay tax of only 15% (maximum) on the yearly returns of your funds
  
• - when you both eventually withdraw your money, the combined amount that you can take out that is concessionally taxed is $1,176,611 (as lump sum benefits) or $2,352,224 (as complying pension benefits) in addition to tax-free undeducted contributions.
• - on retirement, you both have the option of buying a tax-effective income stream with your super benefit.