Question 1: Can I transfer money from my super account to my wife’s account without either of us paying tax? We are both over 60 and under 65.

You cannot transfer or rollover superannuation money between different individuals, even if it is to your spouse.

But you do have the option of withdrawing some funds from your super and recontributing them to your wife’s super.

The main reasons people may want to do this include one or more of the following:

• To even up their balances going into retirement
• To stay under the total superannuation balance cap of $1.7 million
• To maximise Centrelink benefits for the older spouse, by taking money from their super and putting it into the younger spouse’s name
• For estate planning purposes, converting the ‘taxable’ component of their super into a tax-free component.

Withdrawals 

As you are both over 60 any withdrawal from super will be tax free.

But you need to ensure you have access to your funds: Your super will have to be classified as ‘unrestricted non-preserved’ for you to have access.

If you have changed jobs since turning 60, or if you have declared permanent retirement, then this should be the case.

But if you meet neither of these conditions, you will need to wait until your 65th birthday to access your funds.

Contributing funds to super

Once you have withdrawn some of your funds, you could then make an after-tax (non-concessional) contribution to your wife’s super.

As your wife is under the age of 67, there are no work eligibility requirements that need to be met.

The maximum amount that can be contributed to super via a non-concessional contribution is $110,000 per annum (2021-22).

However, you could also take advantage of the ‘carry forward’ arrangement and make three years of contributions in one go, but then your wife could not make any further non-concessional contributions for three years.

The other item to bear in mind is that your total super balance as at the previous June 30 will determine the maximum that can be contributed as a non-concessional contribution, and how many years of ‘carry forward’ you are allowed to use, as shown in the below table:

The implementation of a cash out and recontribution strategy can be complicated so you may want to engage a licensed financial adviser, who could also assist you with any other retirement goals.

Question 2: Hi, can Australians living overseas (non-tax-residents of Australia) invest their rental income into super and claim a tax deduction on their tax return? If so, are there important factors they need to consider before doing this?Also, as far as I’m aware, earnings within super aren’t counted as income on the tax return. Is that right? Thanks a lot.

Non-residents for tax purposes may claim a tax deduction for personal superannuation contributions according to the same rules as applies to Australian residents.

For non-residents, many types of income are subject to non-residents’ withholding tax, and therefore not included or assessable in an Australian income tax return.

Examples include capital gains relating to taxable Australian property distributed from a trust, foreign-sourced income and managed funds.

A deduction is not required if there is no assessable income in the Australian tax return. And the ATO would also deny the deduction.

However, rental income from a property situated in Australia is assessable income and is included in your Australian tax return, therefore you can claim a tax deduction against this by making a personal tax-deductible superannuation contribution.

You are correct in noting earnings within super are excluded from your income tax return. They are taxed separately by the super fund at a maximum rate of 15 per cent.

There is one other important factor to consider, which is how does your residing country treat this income?

• Is the rental income assessable in that country?
• Is there a double tax agreement between Australia and your residing country?
• Do they deduct a tax deduction made in Australia?

In a worst-case scenario, claiming a tax deduction for personal super contributions, resulting in no Australian tax payable by a non-resident, may actually increase the tax liability in the country of residence.

You should therefore seek tax advice in your country of residence or from an international tax specialist.

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. 

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