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How do tax offsets for spouse contributions to super work?

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I have heard about a tax offset for spouse contribution to the spouse’s super. Could you explain how it works?

A taxpayer who makes a super contribution for a low-income or non-working spouse can get a tax offset. It has to be to a complying fund, the spouse is legal or de facto or same sex, who lives with the contributor. Both have to be residents in Australia and the spouse’s income plus reportable fringe benefits plus employer super contributions cannot top $13,800.

The maximum offset is $540 and that comes from a maximum contribution of $3000 multiplied by 18 per cent. If the spouse’s income is $10,800 or less, then the taxpayer’s contribution gets the $540 maximum but for every dollar over $10,800, the contributions limit of $3000 reduces by a dollar for dollar until it’s wiped out by $13,800.

Here is an example. Bill and Kaye are in a de facto relationship and Kaye puts $300 a month into Bill’s super fund. That adds up to $3600 and Bill’s income is $10,000, so Kaye gets a tax offset of $540, which is the maximum. Note, the extra $600 contributed was disregarded in the calculation of the offset. If Bill’s income was $12,000, you would deduct $10,800 from it and that means it’s $1200 over the best income level to still get the offset. The offset is reduced from $3000 by taking away the $1200 to give you $1800 and then this is multiplied by 18 per cent, which gives a $324 offset.

A relevant question is whether there are any age restrictions on these spouse contributions? And here’s the answer — they can be made until the spouse hits 70 but after 65 she has to pass the work test. After 70 the game is over.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Thursday, November 24, 2011

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