Topping up Low Income Partner's Super

I'm on a high income and my wife is on a low income. Between us we have a reasonable amount of savings and a mortgage almost paid off. I'm contemplating the tax benefits in topping up her super. There seems to be different tax treatments based on if she tops up her super, or if I top up her super

  • If she puts in an additional $1,000 to her super, the government will kick in an additional $500 as a super co-contribution
  • If I top up her super with $3,000, I get a $540 tax offset

So for the net price of $3,460, we get $4,500 into her super account. Is there anything I'm missing here?

There's also the Low income Super Tax Offset but I don't think there's anything we can do to maximise this, short of her working more.

Edit - fixed up the maths

Comments

  • +2 votes

    That sounds right.

    I've been doing that for the last 10 years at least.

    If you submit your own tax return that $540 refund is hidden away under some obscure sub heading if I recall.

    Edit: yeah that's it…

    You are claiming tax offsets, adjustments or a credit for early payment
    Other tax offsets

    •  

      Thanks, I wasn't sure if it was that straightforward but I knew this community would know!

      any other tax tips? Are accountants worth it?

  • -1 vote

    Not yet

    • +1 vote

      ?

  •  

    Depending on your tax bracket , you may be better off maximising your own concessional super contribution threshold first.

    •  

      Thanks, this is exactly the sort of thing I though't I'd be missing. I'm probably at the wrong end of the tax year to be increasing my concessional super, as this has to go through my work right, as it's before tax?
      I'm in 32.5c bracket, so if I were to put the $3,000 into my super instead it'd be a tax benefit of $3000*(32.5%-15%) = $525, so pretty much a line ball compared to the $540 tax offset for contributing to her super. This maths will change when I move up to the next tax bracket.

      •  

        just bpay it to your super and then claim a tax deduction as long its bpayed before june 30 you are all good.

        • -1 vote

          Correction here. Yes, you add to your super first from your after-tax dollars. Then you need to submit Notice of intent to claim form to your super fund (not to ATO). Then the super fund needs to reply with a confirmation letter, which usually takes 1-2 weeks to organise (longer if there are issues). Only then you can use that letter and claim in your tax return. Overall, it's a 2-3 weeks process and if you don't get that letter from super fund before 30th of June, even if you deposited extra contributions in this FY, you'll only be able to claim them in the next FY.

          Also, watch out for contribution cap

          TL;DR: if you want to make concessional super contributions and claim them in this financial year - start organising that now.

          • +1 vote

            @andrek: Actually, I was incorrect there. I was under that impression after I called my fund last year. However, after looking it more closely yesterday, looks like as long as you pay before the end of FY you'll be able to claim the deductions.

  • +1 vote

    Yep, I do exactly the same.
    We also salary sacrifice into Super down to the tax free threshold, so that she pays no PAYG tax.

    •  

      Let us say I am earning $100,000, and I salary sacrifice $81,800 to bring down my taxable income to the tax-free threshold (of $18,200). [Assume I can live off $18,200 and that I am happy to keep super money locked in for another 20 years or so)

      If I did this, I would effectively pay 15% contribution tax on the $81,800 (or $12,270) versus $22,697 if I just did nothing ($5,092 plus 32.5 cents for each $1 over $45,000 for FY21). So I am already better off by $10,000 or so, is this correct?

      Are there any other benefits for having a taxable income of $18,200? Can I get any other benefits like discount cards, low-income benefits, cheaper utilities etc?

  • +1 vote

    Looks like there's nothing amiss here.
    As long as she works less than the cutoffs.

    https://www.amp.com.au/superannuation/super-contributions/sp...

    •  

      the receiving spouse’s income must be $37,000 or less for you to qualify for the full tax offset and less than $40,000 for you to receive a partial tax offset.

      pretty low

  • +1 vote

    I'm no expert but I think your numbers are a little off.

    "If she puts in an additional $1,000 to her super, the government will kick in an additional $500 as a super co-contribution"
    She is paying $1000 to put $1500 into super.

    "If I top up her super with $3,000, I get a $540 tax offset"
    You are paying $2460 net to put $3000 into her super.

    Overall $3460 after tax dollars paid to get $4500 into super (I think these are technically non-concessional contributions).

    As mentioned, you could choose to make a concessional contribution into your super. This means you can claim it as a tax deduction, and the super fund treats it as a concessional contribution (-15%). You can do this yourself, and do not have to go via your employer: https://www.ato.gov.au/Individuals/Income-and-deductions/Ded...

    •  

      Yep, I've fixed it the numbers up, thanks

  •  

    be aware i paid 5k after tax of my own money into my own super via bpay and the super fund taxed me. i ticked the box on the super website saying i was going to claim it and told accountant to use that 5k amount to reduce my tax anyway. but wife pays $1000 into hers and gets nil tax and gets the $500 co-contbrition from ato too. i think ill do the same and only pay 1k in this year.

  • +1 vote

    My spouse is not working and doesn't have super account yet. Can she open a super account where I can contribute?

    I am in the 32.5 tax bracket.

  •  

    Yes i opened one for mine. Just check your super website