Spouse Super Contribution Tax Offset: Complete Guide to Boosting Your Partner's Retirement

The spouse superannuation contribution tax offset is a valuable but often overlooked strategy for couples to build retirement wealth together. If your spouse or partner has low or no income, you can make contributions to their super account and receive a tax offset of up to $540. This not only helps balance superannuation savings within the relationship but also provides an immediate tax benefit to the contributing partner. This comprehensive guide explains how the spouse contribution tax offset works, who is eligible, and how to maximise this opportunity for your household.

How the Spouse Contribution Tax Offset Works

The spouse contribution tax offset allows you to claim a tax offset when you make after-tax contributions to your spouse's superannuation account. Unlike a tax deduction that reduces your taxable income, a tax offset directly reduces your tax payable, making it particularly valuable. The maximum offset is $540, which is 18 per cent of the maximum eligible contribution of $3,000. This means contributing $3,000 to your spouse's super provides the full $540 benefit.

To receive the maximum offset, your spouse's income must be $37,000 or less per year. The offset then reduces gradually for spouse incomes between $37,000 and $40,000, phasing out completely once spouse income exceeds $40,000. The income definition includes assessable income, reportable fringe benefits, and reportable employer super contributions, providing a comprehensive measure of your spouse's total earnings. This makes the offset most beneficial for couples where one partner is not working, works part-time, or is on extended leave such as parental leave.

Eligibility Requirements for the Offset

Several conditions must be met to claim the spouse contribution tax offset. First, you must be legally married or in a de facto relationship with the person you are contributing for. The definition of spouse includes same-sex partners and couples who live together on a genuine domestic basis. You do not need to live together at the time of the contribution, but you must not be living permanently apart.

Your spouse must be under 75 years of age at the time the contribution is made. If your spouse is aged 67 to 74, they must meet the work test or work test exemption criteria to receive the contribution, although recent rule changes have relaxed some of these requirements. The receiving spouse must not have exceeded their non-concessional contribution cap for the financial year, and their total super balance must not exceed $1.9 million at the end of the previous financial year. Additionally, both you and your spouse must be Australian residents for tax purposes at the time of the contribution.

Benefits Beyond the Tax Offset

While the $540 tax offset provides an immediate financial benefit, the longer-term advantages of spouse contributions are often more significant. Contributing to a lower-earning spouse's superannuation helps balance retirement savings within the relationship, ensuring both partners have adequate funds in retirement. This is particularly important given that superannuation is generally treated as individual property in Australia, meaning each person can only access their own super accounts.

Balancing super between partners also maximises the household's ability to use various superannuation strategies. Each person has their own contribution caps, transfer balance cap for pensions, and access to government benefits like the super co-contribution. A couple with roughly equal super balances can potentially shelter more money in the tax-advantaged super environment than a couple where all the super is concentrated with one partner. Use our superannuation calculator to model how spouse contributions could grow your combined retirement savings over time.

How to Make Spouse Contributions

Making a spouse contribution is straightforward. You make the contribution directly to your spouse's super fund from your personal bank account, using after-tax money. When making the contribution, you typically need to complete a form or indicate online that the contribution is being made by a spouse. This ensures the fund records the contribution correctly and that your spouse's records reflect the source of the funds.

The contribution counts towards your spouse's non-concessional contribution cap, not yours. This means your spouse must have available cap space to receive the contribution. The standard non-concessional cap is $120,000 per year, so most people have ample capacity. To claim the tax offset, you include the details of your spouse contribution in your individual tax return. You will need to know the amount contributed and your spouse's income for the relevant financial year to calculate the offset correctly.

Comparing Spouse Contributions to Other Strategies

The spouse contribution tax offset is one of several strategies available to couples for building super. Contribution splitting is an alternative approach where one partner splits their employer or personal concessional contributions with their spouse. This can be done after the financial year ends and shifts contributions already made. Unlike spouse contributions, contribution splitting does not provide a direct tax benefit but does help balance super balances over time.

For spouses who earn income, making personal concessional contributions may be more effective than receiving spouse contributions. Concessional contributions provide tax deductions at the contributor's marginal rate, which often exceeds the 18 per cent effective benefit of the spouse contribution offset. However, for spouses with no income or very low income who cannot benefit from personal tax deductions, spouse contributions provide a mechanism for the higher-earning partner to boost their super while receiving a tax benefit.

Strategic Timing for Spouse Contributions

The spouse contribution tax offset is particularly valuable during specific life phases. When one partner takes parental leave or extended career breaks, their super contributions typically cease or significantly reduce. This is an ideal time for the working partner to make spouse contributions, helping maintain retirement savings momentum and receiving the tax offset while the non-working spouse's income is low.

Similarly, couples approaching retirement may find spouse contributions valuable if one partner has a significantly lower super balance. Making contributions in the years before retirement can help balance accounts and maximise the combined transfer balance cap available to the couple. However, be mindful of the total super balance threshold, as the receiving spouse cannot have a balance exceeding $1.9 million. Planning spouse contributions as part of a broader retirement strategy ensures maximum benefit to the household.

Common Mistakes to Avoid

Several errors can prevent couples from receiving the full benefit of spouse contributions. One common mistake is contributing more than $3,000 without realising the additional amount does not generate extra tax offset. While you can contribute more to your spouse's super, only the first $3,000 attracts the 18 per cent offset. Contributions above this amount simply add to your spouse's super without providing you with additional tax benefits.

Another mistake is making spouse contributions when the receiving spouse's income exceeds the thresholds. If your spouse earns more than $40,000, no tax offset is available, making the contribution less valuable from a tax perspective. Some couples also confuse spouse contributions with contribution splitting, which has different rules and timing requirements. Finally, failing to keep records of the contribution and properly reporting it in your tax return means missing out on the offset entirely.

Conclusion

The spouse super contribution tax offset offers couples a valuable opportunity to build retirement savings together while receiving an immediate tax benefit. By contributing up to $3,000 to a lower-earning spouse's super, you can receive a tax offset of up to $540 and help balance superannuation within your relationship. This strategy is particularly beneficial during parental leave, career breaks, or when one partner works part-time.

When combined with other strategies like contribution splitting and maximising each partner's individual contribution caps, spouse contributions form part of a comprehensive approach to household retirement planning. Consider your combined circumstances, including income levels, existing super balances, and retirement timeline, to determine whether spouse contributions should be part of your financial strategy. The long-term benefits of balanced super accounts often exceed the immediate tax offset in overall value.