Nick Bruining Q+A: These hacks will recharge superannuation when a partner returns to work after raising kids

Question

I am very keen to recognise the contribution my partner has made to our family by taking time out of the workforce to raise our two young children.

While financially we managed to cope on one income, the difference in superannuation fund balances is now quite noticeable and I would like to take steps to restore this imbalance.

Now that she has returned to work, can you suggest any strategies we might use to boost her super?

Answer

It’s not an uncommon situation with many couples who take time out of paid employment to start a family.

Unfortunately, there’s no simple mechanism to re-allocate money from your fund to hers. But there are a few rules you can make use of.

You can split the previous year’s concessional contributions with your partner and direct your fund to transfer the after-tax amount to her account. It can be an account with your super fund or another.

You simply need to provide the details on the spouse-splitting form which you can download from your super fund. This needs to be done before you lodge your tax return for the year in question.

Depending on your family’s cash-flow, there is nothing to stop you continuing with this strategy until the imbalance is restored. You might also increase the amount you contribute to super, beyond the employer’s compulsory 11 per cent. You need to ensure that you don’t exceed the concessional contribution cap of $27,500 for this financial year.

That could be done via a salary sacrifice arrangement or you can make a personal concessional contribution before the end of the financial year. This way, the amount after tax to be transferred under the spouse-splitting rules could be up to $23,775.

Depending on your partner’s income, you might also qualify for two other low income concessions. If she was to make an after-tax or non-concessional contribution of $1000, the Federal Government would contribute a further $500 to her account under the co-contribution concession.

To qualify for the full amount, her gross income needs to be less than $43,445, shading out altogether if her income exceeds $58,445. At least 10 per cent of this income must come from employment type income.

If her income is less than $37,000 this would also make you eligible to receive the superannuation spouse offset. This is an 18 per cent tax credit you receive on contributions you make to her superannuation account, up to a maximum of $3000.

On the $3000 maximum contribution, you would receive a $540 credit that would either reduce your tax liability or boost your own tax refund. You could then contribute that $540 back into her super.

Got a question for Nick? Email yourmoney@thewest.com.au or write to us at Your Money, GPO Box D162, Perth WA, 6840.

Nick Bruining is an independent financial adviser and a member of the Certified Independent Financial Advisers Association