Tim Howard, advice strategy and technical specialist at BT Financial Group, said spouse contribution tax offset can be applied if a spouse is on a low income of less than $40,000 or not working in a particular year, is under the age of 75 years and has non-concessional cap space.
“Then you make an NCC into their superannuation on their behalf. If you do this, you might have, or you would be able to, receive a spouse contribution tax offset, which is a tax offset for the working spouse who made the NCC for the low income or the non-working spouse,” Howard said.
Howard gave an example of a couple, Malcolm and Janet. Malcolm is semi-retired and Janet is still working. Malcolm is only going to earn $19,000 of income in the current financial year, and Janet is going to make a non-concessional contribution into Malcolm’s superannuation.
“If she made an NCC of $2,000 she would be eligible to receive a spouse contribution tax offset to reduce the tax payable in her income tax notice of assessment effectively for the financial year of $360. It is a tax saving for her only if she has tax to pay. She’ll benefit from that non-refundable tax offset,” Howard said.
“Another example is Adam and Cara who are at accumulation age. Kara’s working part-time, earning within the threshold, just over the $37,000 or lower and Adam looks to make a $3,000 spouse contribution, NCC, into Kara’s superannuation.”
He continued that as Kara is earning between $37,000 and $40,000 there is a slight reduction on the amount of the tax offset that Adam would receive.
“And a final example with a much higher income earning spouse. Rebecca earns $180,000 a year. Her partner, Emily, is a teacher working part-time on $37,500 a year,” he said.
“Is it better for Rebecca to make a personal super contribution (PDC) and claim a deduction for it, or is it better for Rebecca to make a NCC for Emily and get the spouse contribution tax offset?
“If we run the numbers on that, the value of the spouse contribution tax offset with a lower income and earning spouse is going to be about $450 off Rebecca’s tax payable for the year. If Rebecca has concessional cap space, she’s going to be better off making a personal contribution and claiming a tax deduction for that first.
“She’d get a $720 tax saving claim for a contribution into her own fund. But if she does a PDC first, or maximises a concessional cap, then you could look to maybe split some of that PDC across to Emily.
“You could then look to also making an NCC if she has spare cash flow into Emily’s superannuation, and she would get the spouse contribution tax offset.”
