Last week we looked at the opportunities provided by one of the new superannuation rules – the ability for employees to make super contributions and claim tax deductions for them. A second new rule makes big changes to the spouse contribution scheme so it is much more useful for many more people.
People who have a spouse who earns less than $40,000 per year can earn a tax rebate by contributing to the spouse’s super. That’s not just a tax deduction, it’s a rebate off their tax bill and may create a tax refund, depending on their circumstances. The maximum rebate available is $540.
Under the old rules the scheme was only useful if the spouse had very little income. The maximum allowed was $10,800 to earn the full rebate, and up to $13,800 for a partial rebate. Those low figures have been raised to suit many more families.
The threshold spouse income up to which a full rebate will be paid is now $37,000 per annum, much more in line with the second income earner in a family. A partial rebate will be paid if the spouse’ income is up to $40,000 per annum. This will make the scheme useful to many more people.
The rebate payable is 18 per cent of the super contributions made for the spouse up to $3,000 maximum. If the full amount is contributed and the spouse’s income is below $37,000 the tax rebate will be 18 per cent of $3,000, or $540.
Young people may say there is no point in spending $3,000 to earn $540 but of course the $3,000 isn’t lost. It is invested in the spouse’s super account and growing. No contribution tax is applied to it. It will be fully available plus compounding interest at retirement.
The scheme will appeal more to people in the mid to later stages of their career but contributions by young people will see maximum gains over their many years ahead.
Another way to earn free money from the Government is using the super co-contribution scheme. People with lower incomes who contribute after tax savings to their super can earn a free Government contribution to their super account.
If their income is below $36,813 and they contribute $1,000 of after tax money to their super account the Government will add $500 to it for free. People whose income is over $36,813 but less than $51,813 will receive a government contribution of a proportion of the $500.
Contributions to both the spouse super rebate and the government co-contribution scheme can be either as a lump sum or a more painless regular monthly payment. The bonus amounts earned aren’t huge but they will build up, especially if maximum benefits are earned from the schemes over many years.