In navigating the complexities of financial planning, one topic that often gets overlooked in a couple’s conversations is superannuation. Yet, it’s a discussion that could lead to a more comfortable retirement, with potential tax benefits to boot.
For Australians over 50, understanding the ins and outs of superannuation is crucial, and there’s a particular strategy that could boost your retirement savings.
Spousal contributions are a savvy way for couples to maximise their superannuation benefits. If one partner is earning a low income or not working, the other can contribute to their super and may be eligible for a tax offset of up to $540.
This not only helps balance the retirement savings between both partners but also takes advantage of tax efficiencies.
Take the story of Melbourne mum-of-three Pip Thorne, for example. While on parental leave, her husband, Rob Woodside, made spousal contributions to her superannuation fund. She attests that these contributions were instrumental in keeping her super balance growing during her four and a half years away from the workforce.
‘It basically meant it kept ticking along,’ she said, highlighting the importance of maintaining super contributions even when one’s income is paused.
‘That was good for us, we were saving more as a couple and it was good for me as there was more money going into my super.’
Peter Treseder, an education manager at AustralianSuper, explained to Yahoo Finance that spousal contributions are particularly beneficial when one spouse isn’t earning or is working part-time: ‘Because it’s an after-tax contribution, it goes into super tax-free. And then there’s the bonus of getting a little bit back at tax time.’
‘With super, the earlier you get money in, the better off you’re going to be because of the wonders of compound interest,’ Treseder adds.
Treseder further explains that if you contribute to your spouse’s super, you could receive a tax offset of 18 per cent of the contribution amount, capped at $540 for a $3,000 contribution. This means that even if you contribute more than $3,000, the maximum tax offset remains at $540.
To be eligible for the full tax offset, your spouse’s income must be less than $37,000, and the benefit gradually reduces, phasing out completely once they earn $40,000.
Despite the clear benefits, AustralianSuper’s research reveals that many couples don’t discuss their superannuation. With 82 per cent of Australians acknowledging the importance of such discussions for a healthy relationship, a surprising 6 per cent have never talked about the subject.
Furthermore, nearly half of the surveyed married and partnered Australians were unaware of their partner’s super fund, and 55 per cent believed their partner’s super had no impact on their finances.
Treseder encourages couples to have these essential conversations, suggesting that while it may not be the most romantic topic, it’s a conversation worth having for long-term financial health. The benefits are clear: more money to retire on and a tax offset to sweeten the deal.
Thorne and her husband are a testament to this, as they’ve continued to make extra contributions to her super since she returned to work, ensuring they’ll have more funds to enjoy in retirement.
As you approach retirement, it’s crucial to consider every strategy available to maximise your superannuation. Spousal contributions are a simple yet effective way to ensure both partners are set up for a comfortable future.
If you have your own super story or strategy that’s worked for you, we’d love to hear about it in the comments below. Your experience could inspire others in the YourLifeChoices community to take action and secure their financial future.
Also read: Superannuation and retirement dreams: Are Australians financially ready?
