They say marriage is a lot like a rollercoaster. It’s fun and rewarding but can also be full of twists, turns and the occasional head-scratching moment—like wondering why you ever gave up sole possession of the TV remote or navigating the politics of movie night selection. If you’re building wealth together on this wild ride, you might even be wondering about making contributions to your spouse’s superannuation.
At First Financial, we empower individuals and couples to retire on their terms. We tailor our superannuation advice to ensure financial security and a sustainable future. If you and your spouse are planning for retirement, especially if there’s a disparity in superannuation balances, contributing to the lower balance can be a strategic and valuable approach for various reasons.
Factors behind unequal superannuation balances
Firstly, significant disparities in superannuation totals between spouses can stem from various factors. One notable reason is a discernible difference in income. Within a couple, career choices, education levels and the industries they work in can influence earning potential, consequently impacting superannuation.
A significant contributor to divergent superannuation totals is the decision to take a career break or shift to part-time hours. While this may be for a variety of lifestyle reasons, the driver is often the starting and raising of a family. Historically, such choices were more commonly associated with women; however, contemporary family dynamics now encompass a broader spectrum of arrangements.
Census data indicates a gradual increase from 68,500 (4.2 per cent) of couple families with children in 2011 to an estimated 80,000 (4.6 per cent) in 2016, reflecting the evolving landscape of familial roles and responsibilities.
Strategic spousal super contributions
There are two primary methods for contributing to your spouse’s super fund: split contributions and spouse contributions made directly to their super account with after-tax funds. This discussion will predominantly concentrate on direct contributions, which are categorised as non-concessional contributions and may entitle you to a tax offset.
If your spouse earns under $40,000, which commonly happens in situations where one partner is working limited hours for health or family reasons, you may be able to claim a tax offset of up to $540.
While $40,000 is the threshold whereby the offset completely phases out, the reduction begins when your spouse’s income surpasses $37,000 annually. The offset is determined as 18% of the lesser of:
- $3,000 minus the excess of your spouse’s income over $37,000
- The total of your spouse’s contributions in the income year
Please note there are some specific eligibility conditions in order to claim this offset.
You cannot claim the tax offset for eligible spouse contributions if you made super contributions to your own fund and then split them with your spouse. This action constitutes a rollover or transfer rather than a contribution.
Additional reasons to make a spousal superannuation contribution
Beyond disparate super balances and tax offsets, spouses may have additional reasons to contribute to each other’s super. They might be leveraging their spousal contribution limits to optimise their combined balances within legal constraints.
Contributing to a spouse’s super can also be a key aspect of estate planning, ensuring a smoother wealth transfer and financial security, particularly for couples with significant age differences or when a known health condition may impact life expectancy. A larger balance for the surviving spouse simplifies matters during a challenging period.
Superannuation strategies for couples revolve around long-term wealth accumulation. They are a valuable consideration for partners of all backgrounds and compositions.
Creating a unified pathway to wealth
To secure a future of financial freedom and shared dreams, create a unified wealth pathway with your partner. Start by jointly setting goals and establishing a cohesive superannuation strategy for long-term security.
Be careful to coordinate your investment approach, including superannuation management, and cultivate a plan that aligns with your joint financial goals and risk tolerance. You’ll also want to discuss your retirement timeline to synchronise your efforts.
Seeking financial advice is crucial for making informed decisions. Your financial adviser can assist in evaluating your superannuation options and determining whether contributing to your spouse’s super is a worthwhile consideration. Always consult with a financial adviser before making any investment decisions.
Talk to the retirement planning and superannuation experts
Throughout the course of a marriage or life partnership, you accumulate a myriad of treasures, ranging from cherished memories to shared financial assets. Superannuation is a prominent example of the latter.
At First Financial, we can help devise smart, tax-effective superannuation strategies, including strategies for couples. If you’re considering making any kind of superannuation contribution, particularly a contribution to your spouse’s fund, talk to a friendly, experienced member of our team today.
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