8.58 A person may make superannuation contributions on behalf of a spouse, or may split contribution contributions with a spouse. There are age restrictions on spouse contributions and contribution splitting. This section considers whether these age restrictions should be removed and contributions made conditional on the spouse meeting a work test.
8.59 The ALRC has concluded that such a change is not likely to have an impact on workforce participation, and therefore makes no recommendation for change.
The current law and its rationale
8.60 The current law does not allow contribution splitting with a spouse aged 65 years or older, or a retired spouse who has reached ‘preservation age’—that is, the age at which a person may access superannuation benefits when retired.
8.61 If there were no age restrictions on contribution splitting, a younger spouse could split contributions with an older spouse who could immediately withdraw the money. This would minimise tax but not contribute to retirement savings.
8.62 Before 2007, there was a maximum amount that a person could contribute to a superannuation fund at concessional tax rates (the ‘reasonable benefit limit’). It was therefore beneficial for a person approaching the reasonable benefit limit to split contributions with a spouse with a lower balance. The reasonable benefit limit was abolished in 2007. The remaining taxation advantage of contribution splitting is for those who reach preservation age and retire before 60 years of age. Withdrawals before the age of 60 are subject to tax, but splitting contributions can allow a couple to take full advantage of two tax-free amounts of $175,000.
8.63 According to the AIST, contribution splitting is not common. However, splitting contributions with a spouse may become more popular if the Australian Government reintroduces arrangements based on superannuation balances. The Australian Government has announced its intention to increase the contributions cap for individuals aged over 50 years with balances under $500,000 in their accounts, but has delayed implementation of this measure. AIST submitted that, if introduced, this would encourage some members to split their contributions with a spouse with a lower balance in order to stay under $500,000.
8.64 A person may make a non-deductible superannuation contribution on behalf of a spouse, and may be eligible for a tax offset when the spouse is receiving low or no income (less than $13,800 for the income year). Spouse contributions can be made where the spouse is aged under 65 years, or has reached 65 but not yet 70 years and is gainfully employed on a part-time basis. Contributions cannot be made on behalf of a spouse aged 70 years and over.
Contribution splitting, spouse contributions and workforce participation
8.65 There is no work test associated with contribution splitting. In the Discussion Paper, the ALRC proposed that the age restriction on contribution splitting should be removed and replaced with a work test on a receiving spouse aged 65 or over.
8.66 There is a work test associated with spouse contributions when the spouse is aged between 65 and 70. In the Discussion Paper the ALRC proposed that the upper age limit should be removed and replaced with a work test on a receiving spouse aged 65 or over.
8.67 These proposals were intended to introduce, or preserve, a workforce incentive for spouses and facilitate the policy intention of superannuation as a retirement income vehicle.
8.68 Some stakeholders agreed that such reforms would create workforce participation incentives. Others indicated, however, that rules about spouse contributions have little impact on decisions concerning work and retirement.
8.69 The ALRC has concluded that removing the age limit on contribution splitting and spouse contributions, subject to a work test, would not have a significant impact on workforce participation decisions. The reasons are the same as those discussed above in relation to voluntary contributions by people over 75 years—namely, that the retirement decision is not usually influenced by the availability of tax concessional savings, and very few people in this age group would benefit from the tax concessions of superannuation. Furthermore, in the case of contribution splitting, the proposed reforms may facilitate the use of superannuation for tax minimisation purposes. Accordingly, no recommendation has been made.
8.70 Several stakeholders argued that the age restrictions should be removed to eliminate age discrimination. Another suggested that removing the restrictions would encourage contributions to lower income spouses’ (usually women’s) accounts. It appears, however, that contribution splitting and spouse contributions are currently not widely used among people aged under 65. Therefore it seems unlikely that these arrangements would be widely used if extended to people aged 65 and over. The ALRC acknowledges the problem of women’s lower superannuation balances, but considers that removing the age restrictions is not likely to make a significant contribution to improving the situation.
8.71 The Law Council supported the current rules as a reasonable restriction on accumulation, but suggested that a change in the age limit might be justified for simplicity and consistency. Similarly, Suncorp suggested that the age restrictions should be consistent with the restrictions imposed on voluntary contributions, that is, an upper limit of 75 years and a work test from the age of 65.
8.72 AIST pointed out that
member splitting and spouse contributions are not commonly used and it is arguable that, for simplicity reasons, these could be removed altogether. These types of rules create confusion and complexity.
8.73 Issues of age discrimination, measures to improve women’s superannuation balances, and measures to reduce the complexity of superannuation rules should be considered in future reviews of superannuation.
Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 6.44; APRA, Prudential Practice Guide: SPG 270—Contribution and Benefit Accrual Standards for Regulated Superannuation Funds (2012), . As discussed below, preservation age is age 55 to 60 years, depending on year of birth.
Tax Laws Amendment (Simplified Superannuation) Act 2007 (Cth).
 See for example ESS Super, ‘Contribution Splitting’, 11 February 2013 <www.esssuper.com.au> at 21 March 2013.
 Australian Institute of Superannuation Trustees, Submission 77.
 ATO, ‘Key Superannuation Rates and Thresholds’ <www.ato.gov.au> at 21 March 2013.
 Australian Institute of Superannuation Trustees, Submission 77.
Income Tax Assessment Act 1997 (Cth) s 290–230. The maximum rebate for the income year is $540: Income Tax Assessment Act 1997 (Cth) s 290–235(2). The Income Tax Assessment Act 1997 definition of a spouse, applicable in this context, is generally consistent with the definition in the Superannuation Industry (Supervision) Act 1993 (Cth): Income Tax Assessment Act 1997 (Cth) ss 290–230(3), 995–1(1).
Superannuation Industry (Supervision) Regulations 1994 (Cth) reg 7.04(1).
 Australian Law Reform Commission, Grey Areas—Age Barriers to Work in Commonwealth Laws, Discussion Paper 78 (2012), Proposal 8–5.
 Ibid, Proposal 8–4.
 Ibid, [8.68].
 Government of South Australia, Submission 95; National Seniors Australia, Submission 92; Financial Services Council, Submission 89; Australian Chamber of Commerce and Industry, Submission 44.
 P Gerrans, Submission 74; Australian Institute of Superannuation Trustees, Submission 47.
 The problem does not exist regarding spouse contributions as these contributions are made from after-tax income.
 National Seniors Australia, Submission 92; Financial Services Council, Submission 89; COTA, Submission 51.
 Government of South Australia, Submission 95 (this submission supported the removal of the age restrictions but not the imposition of a work test).
 Law Council of Australia, Submission 96.
 Suncorp Group, Submission 66.
 Australian Institute of Superannuation Trustees, Submission 47.