Spouse Tax Offset, Personal Super Contributions and Low Income Contributions
The Spouse Offset Tax allows an individual can claim up to $540 in contributions to their spouse’ superannuation fund as a tax offset as long as their spouse has less than $13,800 in assessable income, total reportable fringe benefits and reportable employer super contributions. From 1 July 2017, the spouse’s income threshold will be increased to $40,000, although the allowable offset begins to reduce from the maximum $540 once the recipient spouse earns more than $37,000.
The Personal super contributions deduction allows income earners who are primarily self-employed to claim a deduction for personal super contributions; however, it currently requires that the income earner receive less than 10% of their income as salary or wages. From July 1, 2017 this will no longer be a requirement.
Low-income super tax offset contribution (LISTO) will replace the Low Income Superannuation Contribution (LISC) policy that has been repealed from 1 July 2017. LISTO is designed to ensure low-income earners don’t pay higher tax on suer contributions than they would pay on their take-home pay. While low-income earners may pay as little as zero percent tax, concessional (pre-tax) super contributions are taxed at 15%.
From 1 July 2017, eligible individuals who have a taxable income under $37,000 will receive a LISTO contribution which will equal 15% of their total concessional (pre-tax) super contributions for the income year, with a cap of $500.
HOW IT COULD IMPACT YOU
The increase in the income threshold from $13,800 to $40,000 for the Spouse Tax Offset will mean it is particularly beneficial for couples where one individual is earning significantly more than the other, but where the lower income earner is still earning a moderate income. The old $13,800 limit is lower than the tax-free threshold for income tax, so basically anyone earning enough to pay any income tax would be earning too much to receive any super support from their spouse.
The change to the Personal Super Contributions Deduction simply provides greater flexibility for the self-employed who may also be juggling part-time or contract work for an employer to still be able to claim the benefits of this concession.
The introduction of LISTO is another fairly straightforward provision to ensure that making additional contributions into their superannuation fund does not disadvantage low-income earners.
Overall, the goal of these changes is to encourage individuals and couples who may not have a large superannuation nest egg to make additional contributions without being unduly disadvantaged.
By Jennifer Lowe