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Pump up your super – how to address a fund imbalance between spouses

With some thought and planning you can build a better retirement.

With some thought and planning you can build a better retirement.

Question 1. My wife has only ever worked intermittently so has a low super level. As I am on pensions that provide more than I need for existence, I have been paying enough money into my wife’s super account to hopefully get the government top up. Is this legit, and will she still be eligible for the top up? I’m 73 and my wife 20 years younger.

This sounds like a good strategy for several reasons:

  • Building retirement savings for your wife
    This will allow your wife to retire with some financial resources to live a comfortable retirement. Money invested now will benefit from compounding interest in a tax-friendly environment.
  • Potential tax offset
    If you pay income tax and if your wife earns less than $40,000 you may be able to claim a spouse superannuation tax offset of up to $3000
  • Potential co-contribution
    Instead of paying the money directly into her super fund yourself, you could give her $1000 directly and she contributes it to her super as an after-tax (non-concessional) contribution. If she earns less than $57,016 (2022-23) she may receive a government co-contribution of up to $500
  • Potential Centrelink increase
    As you indicated in your question, contributing funds to your wife’s super will lower the amount of assessable assets you have for age pension purposes. Your wife’s super won’t be assessed until she attains age pension age. This could mean you become eligible for a part pension, or an increase in pension if already eligible.

Question 2. If you are a married couple, in retirement phase, what happens to pension entitlement if one spouse owns the principal residential residence and the other spouse does not own any real property at all?

If you are classified as a couple by Centrelink, then all property and investment assets are added together, regardless of whether they are in joint or single names, when working out any entitlements.

Even if your principal place of residence is just in one name only, you will both be considered ‘home owners’ by Centrelink.

Question 3. My husband and I have been living on my income for the last 15 years. He has not been employed for most of that time. I have $350,000 in my super account and he has $80,000. I will retire this year and will arrange an income stream from my super, of $50,000 per annum, which we will live on.

When I reach pension age in two years, will the fact that my husband is not of pension age affect the amount I will receive as a pension? He will be 60 years old, but will not be working.

As he is below age pension age his super will not be counted and as he is not working, obviously he won’t have any income counted.

Given your situation as outlined you should be eligible for the full age pension, which for a member for a couple is just over $20,000 per year.

Hopefully by receiving the age pension you can reduce how much you draw down from your super, otherwise it will deplete quickly and leave you no savings in a few years’ time.

I don’t know the reason why your husband is not working but if it is a result of a disability then he could look to apply for the disability support pension.

Alternatively, he could apply for JobSeeker if he is prepared to look for work. Once you stop working, he should be eligible under the income and assets test for these payments. He would just need to meet the other eligibility criteria.

Question 4. I plan on selling an investment property held for many years and I will incur a CGT bill. I also planned on establishing a sub fund i.e. PuAF.

Can this donation be used to offset the CGT bill? On downsizing my residence, can I contribute $300K to my super OR does this depend on what my super balance cap is?

Contributing to a Public Ancillary Fund, including a sub fund, are generally tax deductible but I recommend seeking specific tax advice on this.

If it is deductible as expected, then yes, it can reduce or offset your capital gains tax.

If contributing to super using the downsizer rules, so long as you meet all the requirements, including your age and how long you have held the property, then you can make a contribution of up to $300,000 regardless of your existing superannuation balance.

Craig Sankey is a licensed financial adviser and head of Technical Services & Advice Enablement at Industry Fund Services

Disclaimer: The responses provided are general in nature, and while they are prompted by the questions asked, they have been prepared without taking into consideration all your objectives, financial situation or needs.

Before relying on any of the information, please ensure that you consider the appropriateness of the information for your objectives, financial situation or needs. To the extent that it is permitted by law, no responsibility for errors or omissions is accepted by IFS and its representatives. 

The New Daily is owned by Industry Super Holdings

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