Strategic Income Splitting Through Spousal Contributions.
Australia’s super system offers powerful tax strategies that go beyond individual contributions. For couples aged 30–55, spousal contributions and income splitting can balance retirement savings, reduce taxes, and increase Age Pension potential. Here’s how to put them to work.
Understanding Spousal Contributions and Tax Offsets
A spousal super contribution involves one partner making after-tax contributions to the other’s super fund. This signals smart financial collaboration, especially when one partner earns less or works reduced hours. Crucially, if the receiving spouse's income falls below $37,000, the contributor can claim an 18% tax offset on up to $3,000, worth up to $540 annually. ¹
Even above that threshold, a partial offset applies until the spouse’s income hits $40,000. These contributions count towards the recipient’s non-concessional cap, so monitoring contributions is essential.
Takeaway: Couples aiming to balance super or reduce taxable income should explore spousal contributions early in the financial year.
Contribution Splitting: Boost Balance Without New Deposits
Contribution splitting allows one spouse to transfer up to 85% of concessional contributions (such as SG, salary sacrifice, or claimed personal deductions) to the other’s super account².
This strategy doesn’t increase total household contributions but helps equalise balances, which is advantageous for:
Preserving eligibility for carry-forward caps and transfer balance caps ³.
Allowing earlier retirement access if the older spouse is nearing preservation age.
Reducing assessable assets for Age Pension calculations when the younger spouse is below pension age.
Applications must be lodged in the following financial year via the ATO’s splitting form. While contributions count against the contributor’s concessional cap, the recipient incurs no adverse impact on their own caps.
Coordinating Both Strategies for Optimal Outcomes
Using both spousal contributions and splitting can create a synergistic approach. For example, a high-income partner could salary sacrifice and split contributions, allowing the lower-earning spouse to accumulate more concessional super. Meanwhile, the other partner makes after-tax spousal contributions to claim tax offsets, helping equalise balances.
To avoid cap breaches, monitor both concessional and non-concessional limits, and coordinate with the super fund to ensure correct recording—especially when claiming deductions or lodging notices of intent to ensure the fund acknowledges the tax-deductible status of contributions.
Who Benefits Most?
Couples with unequal earnings can significantly benefit from these strategies. Those experiencing career breaks (e.g. parental leave), approaching retirement, or aiming to align super balances for estate efficiency will find income splitting especially valuable. Younger partner’s super in accumulation phase can improve Age Pension eligibility for the older partner.
Practical Steps to Implement
Confirm eligibility for both strategies: spouse income thresholds, preservation age, and fund support.
Prioritise salary sacrifice and concessional contributions early to facilitate splitting.
Make a post-tax contribution to spouse before EOFY to claim the full tax offset.
Lodge the splitting application through your fund using the ATO form in the following year.
Track both partners' caps and super balances to avoid excess and maintain flexibility.
In summary, strategic use of spousal contributions and income splitting helps balance household super, unlock tax benefits, and support smoother retirement transitions. For Australian couples aged 30–55, applying these tools thoughtfully can produce a compounding effect—financially and strategically. For personalised guidance, consult your financial adviser or super fund provider.
Disclaimer: The information provided in this blog is for general informational purposes only and does not constitute financial, tax, or investment advice. We recommend speaking with a qualified financial adviser before making any decisions regarding your superannuation. Every individual’s financial situation is unique, and personalised advice is essential to ensure the best outcome for your specific circumstances.
