My partner doesn’t have super, should I be worried?
1 May 2019
Your superannuation savings should be a key part of your conversation about joint finances.
Picture the scene.
You’ve moved past the honeymoon period of a new relationship and you think this could finally be the one.
You’re starting to think about the medium-term future and setting up your lives together.
So you’re at your favourite restaurant discussing joint finances when your partner drops a bombshell by revealing they hardly have any superannuation saved up.
Time to smash up the breadsticks, pour your glass of wine over them and storm out never to return?
Probably not. Ditching the love of your life for a lack of super could be a slight over-reaction. After all, there could be a number of entirely legitimate reasons their super is a bit low.
- They could have been out of the paid workforce studying or volunteering for an extended period.
- They could have been self-employed for a while and not got around to topping up their super.
- They could have missed payments from a previous employer through no fault of their own.
But while a lack of super is probably not a very good reason to break up, it could give an indication of your partner’s overall attitude towards money.
The last thing you want is for any super secrets to fester. So even if one or both of you haven’t given super much thought up until now, if you’re getting serious it should be an important part of your discussion on joint finances.
With employer and salary sacrificed contributions (up to set limits) typically taxed at 15%, investment earnings taxed at a maximum rate of 15% and tax-free withdrawals once you’re aged 60 or over, super can be an effective tax-friendly way to save and invest your money compared with most people’s marginal tax rate.
7 questions to ask your partner about superannuation
Here are some of the super-related questions you might want to ask yourselves as part of your conversation on joint finances.
1. Should you think about putting money into super to save for your first home together?
If you’re looking at setting up home together and you haven’t bought a property before, you could be eligible for the First Home Super Saver Scheme. You can contribute up to $30,000 each ($15,000 in any one financial year) into your tax-friendly super account and then withdraw it, along with a set earning amount, at a later date to pay for a deposit.
2. Should you think about contribution splitting with your partner?
If you’re looking at boosting super for a spouse with a low super balance, a pretty easy way to get started is contribution splitting. If you’re living together in a de facto or married relationship, this stategy enables the spouse with a higher super balance to effectively transfer amounts of concessional contributions (inclusing super guarantee payments) that they have received into the account of the spouse with a low super balance on an annual basis. And better still it won’t impact either partner’s cash flow.
3. Should you think about making contributions to your partner’s super and claiming a tax offset?
If you’re living together—whether married or de facto—you can potentially benefit from the spouse contributions tax offset. This is where the higher-earning partner contributes towards the lower-earning partner’s super using after-tax dollars and claim a tax offset of up to $540. Of course, you’ll probably want to be in a serious long-term relationship before you consider this, but it’s potentially a way of reducing your tax bill and boosting your partner’s super at the same time.
4. Should you think about taking advantage of government co-contributions?
If one of you is a low-to-middle income earner and they make an after-tax contribution to their super fund, they might be eligible for a government co-contribution of up to $500.
5. Should you think about contributing more into your super?
If you’re thinking long term, super can be an effective tax-friendly vehicle to save for retirement. The current limit on concessional contributions is $25,000 a year (including super guarantee payments from your employer) so unless you’re a very high earner there could be more leeway to top up your super and save on tax each year.
And there’s also now an opportunity to claim a tax deduction for personal contributions made to super (regardless of whether you’re employed or self-employed). These contributions would be concessional contributions, taxed at 15% on entry, and would enable the person contributing to claim a tax deduction up to the balance of their remaining $25,000 concessional contribution cap.
Plus you can also put up to $100,000 a year (or $300,000 over a three-year period under bring-forward rules) in non-concessional contributions.
6. Should you think about changing your investment options within super?
Your super savings are likely to become your biggest pot of money outside the family home. So it’s important to get up to speed with how your money is being invested. Depending on your super fund, you can usually choose between a basic set of options ranging from conservative (less risky assets like cash and bonds that have less potential for growth) all the way through to high growth (more risky assets like shares and property that have more potential for growth).
Your appetite for risk can change as you get older and your life changes so it’s important to revisit your options regularly to make sure they still match your circumstances. Some super funds offer a MySuper lifecycle investment strategy that automatically adjusts your investment options from more growth assets when you’re younger to more defensive assets when you’re older.
7. Should you think about making sure your partner receives your super benefits?
It’s important to make sure the right people receive your super if you die. So if you want to include your partner you’ll need to make the necessary arrangements with your super fund, nominate your beneficiaries and ensure your will is up to date.
Speak to your BFS Adviser and if you don’t have one but are after some advice, please contact us to speak to one of our team.