Many couples approach their finances as a shared project, taking on joint debts, stashing their savings in the one account, and working towards common financial goals. So when it comes to super, it’s only natural to wonder if there’s some way you can approach that as a team too.

Unfortunately, super is designed to be held individually, with access tied to a person’s age and personal circumstances. But even though you’re not technically allowed to combine super, there are other ways you can help your spouse’s nest egg grow.

Spouse super contributions

One of the most straightforward ways you can support your partner’s super is by making a spouse contribution. This simply involves adding money directly to their super account from your take-home pay.

This can be a great way to boost your partner’s long-term financial security, especially if they aren’t employed, earn significantly less than you, or have reduced their hours to care for young children.

There might also be tax benefits available for the partner making the contribution. If your spouse earns less than $37,000 a year and you contribute up to $3,000 to their super, you might be eligible for a tax offset of up to $540.

Splitting contributions

Contribution splitting works a little bit differently. Instead of directing your after-tax money to your partner’s super, you transfer a portion of the contributions you’ve already received.

You can only split concessional contributions, which are the before-tax contributions made by your employer (under the superannuation guarantee or as part of a salary sacrifice arrangement). Also included are any personal contributions you’ve made and subsequently claimed a tax deduction for.

For couples who want to even out their retirement savings, this can be a worthwhile way to go about it. But splitting contributions can have other benefits too. For example:

It might let couples access benefits sooner (if one partner is due to reach preservation age earlier than the other).
It can potentially improve eligibility for the Age Pension if you split your contributions with a younger spouse (as super isn’t counted in the income and assets tests if you haven’t begun drawing it down).
It can reduce the risk of one partner exceeding the transfer balance cap, which is the maximum that can be transferred into the tax-free retirement phase.

A recontribution strategy

This option comes into the picture once you’ve met a condition of release. Like the name suggests, it involves withdrawing money from super and then contributing it back in – either to your own account or your spouse’s.

This might sound unusual at first – why would anyone take out their super only to put it back in? The answer is that super balances are made up of different components, some of which are taxed differently when passed on to beneficiaries.

By withdrawing funds, paying any tax owed, and immediately recontributing them as a non-concessional contribution into a spouse’s account, couples might be able to adjust the tax profile of their super. This can minimise the tax bill your children see upon receiving your super death benefit.

This is the main reason many Aussies make use of a recontribution strategy. But it could also offer similar benefits to splitting contributions, which can help couples better align their retirement goals.

So while you can’t merge two super accounts into one, there are still ways couples can manage their retirement savings jointly. For advice on how to build a stronger foundation for the years ahead, consider speaking to a financial adviser.

Strange as it may seem, some very important changes take place once that money returns to your account, and this act of financial alchemy can have important tax implications for your children down the track.

The super death tax

To understand how a super recontribution strategy works, we need to remember that super is made up of two parts: a taxable component and a non-taxable component.

The taxable component contains your concessional contributions, such as the money your employer pays to your super on your behalf and any salary sacrifice contributions you make. It also includes the earnings your super has generated over the years.

The non-taxable component consists of non-concessional contributions – that is, the contributions you’ve already paid tax on. If you ever topped up your super directly from your savings without claiming a deduction, this is the basket it goes in.

That distinction might not seem important once you turn 60, which is when super withdrawals generally become tax-free. But the implications for your beneficiaries – specifically, your adult kids – can be enormous.

That’s because adult children who don’t rely on you financially are generally considered non-dependants under tax law. Unlike your spouse or any children under the age of 18 (who are classed as dependents), if you want them to get your super death benefit they typically have to pay tax at the time of inheritance.

This can be at least 15% of the taxable component of your super (plus the Medicare levy, if applicable). And considering this component is usually the larger of the two, that’s a hefty sum of money your kids will never see.

How a recontribution strategy might help

By withdrawing your money and then making a non-concessional contribution, you’re effectively converting the taxable component into a tax-free one.

That means when your kids receive your super death benefit, they’ll be dealing with a much lower – or potentially non-existent – tax bill.

This is possible because there’s a period after you reach preservation age and before you turn 75 when both withdrawals and non-concessional contributions are allowed.

As long as your accumulation account is still open (this is where your super has been sitting during your working years) and you don’t exceed any annual contribution caps and balance limits, you could be able to recontribute your super as many times as you like.

Superannuation and tax can be complex on their own, but combined they can be particularly difficult to get right. If you’re thinking of using a super recontribution strategy to lower your kids’ tax burden, a financial adviser can help you understand all the ins and outs so you don’t make any mistakes or run afoul of any regulations.