Those living in households where one spouse has a much lower super balance may want to start considering their options as to how to even up the superannuation imbalance. In Australia, many couples and families have at least one member with limited finances due to taking time off work to raise a family. But there are steps many couples can take themselves to help fix the imbalance, including:
Salary sacrificing involves forgoing part of your salary today to obtain greater financial security in the future. It is an arrangement that must be put in place with an employer, who is then required to make the sacrificed payment to an individual’s super fund before they pay tax on it. Women who salary sacrifice into super in their 20s can put themselves ahead financially, so if or when they take time out of the workforce, they are no worse off. For example, salary sacrificing $20 a week extra into super can help build a healthy buffer ahead of a career break.
Making spouse contributions
Some couples may like to take advantage of being able to make contributions of up to $3000 a year on behalf of their spouse to claim a tax offset of up to $540. However, couples must meet certain conditions for this strategy to work, for example, the receiving spouse’s assessable income (including employer super contributions) must be less than $13,800. Contributions of more than $3000 are also allowed, but couples won’t receive the tax offset for amounts above $3000.
Using the government co-contribution
The government gives a 50 per cent tax-free return to eligible individuals who make a non-concessional (after-tax) contribution to their superannuation as long as they meet the relevant work, income and age tests. Some super fund accounts could get a $500 tax-free contribution.
Under current superannuation rules, an individual can split up to 85 per cent of their taxed superannuation contributions to a spouse’s account once a year. This type of strategy could be more useful for those nearing the proposed $1.6 million balance cap (which takes effect on 1 July 2017).