The strategy To top up my spouse's super before June 30.
Why would I do that? While super is regarded as a shared asset for family law purposes, there are several reasons why it is often preferable for both partners to have their own super. With the super rules changing frequently, the director of Strategy Steps, Louise Biti, says not having all your super in one partner's name is a form of insurance against rule changes.
There may also be estate-planning benefits. For example, if one partner dies and the surviving spouse needs cash, super is an asset they can draw on while waiting for the estate to be sorted (assuming they've reached retirement age). Biti says if your partner is younger than you, having super in their name might help you access Centrelink benefits, as their super will not be taken into account until they reach pension age. Or, if your partner is older and nearing retirement, super in their name can give you both earlier access to the money.
There's also a lot to be said for each partner having control of their own retirement savings.
So how can I help my spouse build up their super? If your spouse is working but not earning a big income, Biti says they may be entitled to the super co-contribution or the spouse super tax offset. The co-contribution, she says, is by far the more attractive and should be your first consideration if funds are limited. But there's no reason why you can't take advantage of both.
To qualify for the co-contribution, your spouse needs to be under 71 on June 30 and earn at least 10 per cent of their income from employment, carrying on a business, or both. Their total income (less allowable business deductions) must be less than $61,920 for a partial co-contribution and $31,920 for the full benefit. Biti says you can get the maximum co-contribution by contributing $1000 after tax to your spouse's account if they earn less than the lower limit. If they earn more, the maximum benefit will be lower and you may not need to contribute the full $1000 (there's a handy co-contribution calculator on the Tax Office's website at ato.gov.au) but Biti says if the aim is to build up your partner's super, it may still be worth contributing the full amount.
The co-contribution will be halved next year and will no longer be available to many middle-income earners, so there's an extra incentive.
Biti says the spouse offset provides an 18 per cent tax offset on contributions of up to $3000 made for an eligible spouse. Unlike the co-contribution, which is paid into your spouse's super account, the offset is received by the partner making the contribution, so it is one way to reduce your tax bill.
Biti says the maximum offset of $540 is available if your spouse earns less than $10,800, though a reduced offset applies if they earn up to $13,800. They must also be under 70 at the time the contribution is made.
Another option is to split some of your concessional super contributions with your spouse. Biti says you have until June 30 to split contributions that you received in the 2010-11 tax year.
What's the benefit of that? There's no immediate tax benefit it's more about equity and reducing the impact of any future rule changes. Biti says you can split up to 85 per cent of the concessional contributions you receive each year, but you have to wait until the financial year is ended before asking your fund to transfer them to your spouse's account.
The only caveat is that you need to be under age 55 or aged between 55 and 65 and still working to receive the contributions. "They don't want working people to roll the money over to their spouse so that they can immediately take it out," she says. Twitter: @sampsonsmh
Scan the hands for a video of Annette Sampson on splitting super.