Home

Nick Bruining: Can I give an inheritance to my wife’s super fund and keep the full age pension?

Headshot of Nick Bruining
Nick BruiningThe West Australian
CommentsComments
‘Can I give an inheritance from my late mother’s estate to my wife’s super and keep the full age pension?’
Camera Icon‘Can I give an inheritance from my late mother’s estate to my wife’s super and keep the full age pension?’ Credit: Catherine Yeulet/Getty Images/iStockphoto

Question

A few weeks ago, you mentioned to another reader that superannuation money held in a partner’s name who is under age pension age is not counted under means-testing by Centrelink.

I am about to receive an inheritance from my late mother’s estate, which is enough to take me over the asset test limit and lose some of my age pension. If I was to contribute some of the inherited money to a super fund in the name of my partner, who is younger, I would again qualify for a full-age pension.

She currently works as a casual for a cleaning company earning $100 a week. What are the rules for starting a super fund and how can I do it?

Get in front of tomorrow's news for FREE

Journalism for the curious Australian across politics, business, culture and opinion.

READ NOW

Answer

It is not possible for you to set up a superannuation fund for your partner. However, your partner can start a super fund in her name and, once in place, there is a facility for you both to make contributions with a number of possible benefits. Given her income, she is unlikely to be receiving compulsory employer super because her gross income is less than $450 per calendar month. That will change on July 1 and her employer will be required to make payments of 10.5 per cent of any pre-tax income to super.

To start a fund now, she simply needs to be an Australian resident and have a tax file number. Most funds will allow you to join online and make contributions subject to contribution rules. Up until the age of 67, anyone can generally contribute up to $110,000 a year of non-concessional money and $27,500 of concessional money.

As she has not previously received or made super contributions, she can probably make full use of incentives including bring-forward rules. In this case, up to three years of $110,000 in non-concessional contributions, or a single $330,000 payment, can be paid into super. Non-concessional money is money where no one is claiming a tax deduction for the contribution.

Your partner will also qualify for the $500 co-contribution payment. If she contributes at least $1000 into super, her fund will receive an additional $500 from the Australian Tax Office. Concessional payments include employer compulsory super and personal tax-deductible contributions to super.

There seems little benefit making concessional contributions because these are subject to a 15 per cent contributions tax. Your partner’s income is low enough to suggests she pays no tax anyway. If you pay tax, however, you might consider making a $3000 spouse contribution to her account. That would attract a special spouse contribution offset of 18 per cent or a maximum of $540. You receive that as refund or tax credit if you pay tax. If you don’t pay tax, there is no benefit in this arrangement.

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

Get the latest news from thewest.com.au in your inbox.

Sign up for our emails