Q: My wife has been the primary carer at home and has just returned to work part-time for a day a week. I have been told I can transfer Superannuation contributions that I receive to her. Is this true? Are there any tax benefits to me if I make a contribution to her Superannuation fund?
A: You can generally split up to 85% of the employer contributions you received, or personal deductible superannuation contributions you made, during the previous financial year with your spouse as long as they are eligible.
This is referred to as contributions splitting. Contributions splitting can be of assistance in reducing your total super balance, a figure that is used to determine your eligibility for various superannuation strategies, or it can simply be a means to achieve greater equalisation of retirement savings between you and your spouse.
To be eligible, your spouse must be under age 65 and, if, over her preservation age, she must not be retired.
The payment of the contributions-splitting benefit is paid as a rollover to your spouse. It is not a contribution.
Unless the contributing member is leaving the fund during the same financial year as the concessional contribution is made, a splitting request can only be made for contributions made during the previous financial year.
For contributions made during the 2017-18 financial year, the amount that can be split is the lesser of 85% of the concessional contributions made to your account or $25,000. This means that where you, as the contributing spouse have received an employer contribution, or you made a personal deductible superannuation contribution, of say $25,000, the maximum that could be split would be 85% (or $21,250). If, however, the contributions had been $40,000, which would be considered an excess Concessional contribution, the amount that could be split would be limited to $25,000.
Contributions splitting does not reduce the contributions originally made for the member for contribution caps purposes.
Another opportunity for tax benefits could be to make a Spouse Superannuation contribution. If your wife’s income is less than $40,000, you may be entitled to an income tax offset of 18% of the contribution you make on her behalf up to $540.
To receive this maximum tax offset of $540, you will need to make a spouse superannuation contribution of $3,000 before 30 June and your wife’s income will need to be less than $37,000. To be eligible your wife must also be under age 70.
Q: With the end of Financial year fast approaching, is there anything I can do last minute to pick up tax benefits by contributing to Super? I am 63 and earn $36,000 from part-time work.
A: As of Saturday, there are only 5 working days until the end of Financial Year. The following is a couple of opportunities you may like to consider prior to the 30 June deadline.
To be eligible to contribute to Superannuation you need to be either under age 65 or satisfy the work test of 40 hours in a 30 day period in the tax year (prior to making a contribution) if older than 65 up to age 75.
In terms of making deductible contributions to Superannuation, there is a cap of $25,000 for the 2019 Financial year on the amount of Concessional Superannuation contributions you can make. This cap includes salary sacrifice and compulsory employer contributions, as well as any personal contributions which you claim as a tax deduction in your tax return.
You may be able to claim a personal tax deduction for personal contributions you make to your super. This includes people who get their income from salary and wages, self-employment, investments, government pensions or allowances, Retirement Income Streams, partnership or trust distributions or foreign sourced income. Please check what contributions have been made into your Superannuation fund in the Financial year to date to ensure you don’t breach the contribution cap. If you are under the cap, you could top up your Super and claim a tax deduction for those contributions up to the Concessional Contribution Cap.
The cap for after-tax contribution to Super for the 2018- 2019 financial year is $100,000. If you’re under age 65, you can also ‘bring forward’ up to 3 years’ worth of after-tax contributions, which means you could contribute up to $300,000 in a financial year. However, if your total superannuation balance at 30 June of the previous year was $1.6 million or more, your after-tax contribution limit will be reduced to zero
When you make an after-tax super contribution and you earn less than $52,697 per year before tax, you are eligible for the Government Superannuation co-contribution. If you earn less than $37,697 the maximum co-contribution is $500 based on 50c from the government for every $1 you contribute. The amount of the Government co-contribution reduces as your earnings increase above this.
In order to benefit from the maximum Government Co-contribution, you will need to make a $1,000 non-concessional superannuation contribution before 30 June and ensure that you lodge your tax return for the 2018-19 year in due course. Further, at least 10% of your income must be income that has been derived from employment or from carrying on a business (or a combination of both).