Contribution Splitting: How to Boost Your Spouse’s Super

6 min read
22/03/22 2:58 AM

Supers are sweeping across Australia. Assets in superannuation funds totalled $3.5 trillion during the December 2021 quarter. 

This statistic may make building a super fund seem easy. In reality, many people struggle to build their savings, even if their spouses are wealthy. If you make a lot of money, you should consider steps to boost your spouse’s super holdings. 

How can you make a spouse contribution in Australia? What is an after-tax contribution like, and how can you split your contributions? What are some strategies you should follow to keep your money safe? 

Answer these questions and you can grow a great nest egg in no time. Here is your quick guide.

Make an After-Tax Contribution 

An after-tax contribution is a direct deposit you make into your spouse’s super. If you’re looking for a simple way to help your spouse, an after-tax contribution is your way to go.

However, not everyone can make a contribution. You must meet several criteria, and you have to understand some terms before you can make your contribution.

Eligibility of Spousal Contributions

The first criterion you must meet is the spousal criterion. In Australia, a spouse is a person you are legally married to or a person you have moved in with and live with on a domestic basis. You share a residence with them, and you may have children with them.

Once you meet that criterion, you need to examine the finances of your spouse. They cannot exceed their annual non-concessional contributions cap.

For the 2021-22 financial year, that would be $110,000. Keep in mind that this cap changes from year to year, so you should check to see what it is before you make your deposit.

They must have a Total Super Balance of less than $1.7 million before you make your contribution. It is okay to exceed that line with your deposit, but you should not exceed the contributions cap. 

Your spouse must be younger than 75 years of age. If they are over 67 years old, they must meet the work test rules, meaning they are employed for 40 hours or more in a 30-day period.

Tax Offsets

A tax offset is a dollar-for-dollar reduction of the taxes you have to pay. You can claim several super-related tax offsets, and the biggest one is making contributions for your spouse. If you make a contribution, you can receive an offset of up to $540. 

As with making a contribution, you must meet several criteria in order to receive an offset. Your spouse’s income, benefits, and employer super contributions must total below $40,000. If your spouse’s employer is not paying their super, you should contact the ATO. 

The contribution you make must go into a legitimate super fund. You also cannot receive a tax deduction based on the contribution. You can only qualify for a tax offset, which the Australian government will determine after you make your contribution.

Split Your Contributions Between Your Accounts

You can split the contributions you make every year to your super so your spouse receives some money. This is a good idea if there is a significant imbalance between your spouse’s holdings and yours. 

Splitting your contributions lets you make long-term deposits in your spouse’s account. But you must meet several stipulations in order to do so.

Criteria for Contribution Splitting 

The criteria for contribution splitting is less significant than the criteria for a direct payment. You just need to meet the qualifications for being married in Australia. 

Both of you must be Australian residents. You or your spouse does not have to be a citizen, but both of you should have legal rights to live in Australia. You must be living together and not going through a separation.

You cannot split your funds if your spouse is older than 65. You can make contributions to your spouse’s super if they have reached their preservation age, but they must still be working.

Funds Available for Splitting 

You are not able to split all of your funds. You can transfer a maximum of 85% of your taxed splittable contributions into your spouse’s account in any given year.

Taxed splittable contributions include any contributions that your employer makes. You can transfer contributions you make from salary sacrifices. You can also transfer any deposits you claimed as tax deductions on your income taxes. 

You may not be able to split contributions that your spouse makes to your account. Government co-contributions and temporary resident contributions are also exempt from splits.

Applications for Splitting 

You must file an application in order to split your contributions with your spouse. Some super funds do not allow contribution splitting at all, while others restrict it heavily. You should talk to a fund representative before you decide to split your contributions. 

Your fund may require you to submit a form to the ATO. The ATO has a superannuation contribution splitting application form. To fill this form out, you need the details of your fund and your spouse’s fund, so make sure you have this information available. 

You file an application in the year after you make your contributions. If you want to apply for the 2021-22 financial year, you should submit your application after 30 June 2022. You can make your contributions right away, but you must submit your documents after the year is over. 

You can apply to split contributions in the same year if your spouse will withdraw the whole super benefit. They may want to transfer their money, or they may need to use their money to pay for something. 

Splitting Strategies

Some funds will take fees for splitting your contributions. These fees cover the fund in case you or your spouse loses money, and it recovers the cost of losing the money that will be transferred. 

The more money you transfer, the higher the fees you pay. You may want to transfer a small amount of money so you are not paying too much on fees. 

Consider making a series of small contributions through time instead of making a couple of big contributions. This will create a steady stream of money for your spouse while leaving plenty of money for yourself.  

Develop Good Financial Strategies

The contributions you make to your spouse’s super won’t matter if they don’t put the money to good use. You and your spouse should engage in a few different investment strategies so you can grow your money over time.

Get Financial Advice

Whenever you want to boost superannuation accounts, you should go to a financial professional for help. You can ask them questions about good investment strategies, and you can ask them to look over your paperwork. 

Read a few guides to super tips and strategies, especially if you are very young. Many young people do not make substantial contributions to their supers, which makes investments difficult. Pick a few ways you can make contributions now, like reducing your discretionary spending.

Develop a Goal 

Don’t just throw money into your spouse’s account for the sake of throwing money into it. You and your spouse should sit down and come up with a goal for your spousal super strategies. 

Your goal can be anything. You may want your spouse’s holdings to equal your holdings. You may want enough money so your spouse can retire when they turn 60 or 65. 

Write the goal down on a sheet of paper, and then think about how you can reach that goal. You should have a way to track your progress over time, like viewing the holdings in your super accounts.

Resolve Your Debt

Whatever your goal is, your debt is your biggest obstacle. You should take steps right now to pay off your debt so you can make larger contributions. 

If you have multiple debts, you should figure out which ones you want to prioritize. Your priority debts are your mortgage payments and utilities. You could lose your house or have your power shut off if you don’t get these resolved. 

Student debt can be tricky to pay off because you must start paying back your debt once you earn a high income. Read a guide to paying back student debts so you can hit the ground running.

Whatever money you have leftover from your weekly expenses, you should throw them toward your debts. Once you have your priority debts paid off, you can move on to your phone bills or credit card debts. 

You can apply for financial hardship if you are struggling to pay your debt. But this is the last resort after all attempts at paying your debts back have failed. Talk to a financial professional before you do this.

After you have paid off all your debts, you can focus on investing and boosting your super. But you should make sure you have enough money saved for an emergency fund. Your fund should cover your expenses for at least three months in the event you lose your job.

Grow Your Family’s Super Accounts

You have two powerful ways to grow your spouse’s super. You can make one-time after-tax contributions, though you need to follow a series of rules.

If you want to contribute money to your spouse’s superannuation account long-term, you can split your contributions. You must fill out paperwork and run your splits by your super fund. 

Don’t just shovel money into their account. Take steps to pay off your debt and make investments that will grow holdings through time. 

You can do this with smart financial professionals. Crescent Wealth offers a team of knowledgeable super managers. Contact us today.

You should always seek personal finance, legal and tax advice when deciding to make any financial investment decisions.