Episode 44.1 - Money for Jam Part 1 - How to help your spouse and benefit financially
In this first part we are looking at how you can look like the caring partner and boost up your spouse’s super balance by making a spouse contribution (while secretly doing if for your own benefit by way of a tax offset).
Have a listen!
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Alex Hont 0:17
Welcome to the masters of finance podcast. We've got a little mini series coming up for you over the holidays. We're going to call money for jam when we go through a few ideas of how you can get money for really not doing very much. In part one of our series, we're going to have a look at the spouse contributions and how that can save you some money on tax. Have a listen.
Chris Haggart 0:37
Chris Haggart and Alex Hont are authorized representatives of Moran Partners Financial Planning. Any opinions expressed in this podcast are solely our own and do not reflect the opinions or views of Moran Partners Financial Planning or any entity we are associated with. This podcast is for informational purposes only and should not be used for or doesn't as a constitute investment advice.
Alex Hont 0:57
A7ll right, Chris. Welcome to the masters of finance podcast. welcome here we are. We're recording this just before Christmas although this one will come out after Christmas and this is part of our little mini series we're going to do, we're going to call money for jam.
Chris Haggart 1:10
Yeah, it's a good little a little sort of piece whilst to everyone's away rather than making them listen to a big long one.
Alex Hont 1:18
Yes, yes. Well actually, we're gonna break it up into a few bits. So we've got something coming for you over the break. So just to keep everyone interested, but Chris, I was interested right I've heard this expression money for jam. What's it mean? Where's it come from? Because I don't know if you about you, but I don't have a lot of jam to give away that gives me money back.
Chris Haggart 1:36
Yeah I don't know what the origin of the origin of the phrase is? I think I know what it means. But
Alex Hont 1:42
Well, I looked it up. Right. And actually, they describe it as a very quick and easy way to earn money. But where it came from apparently was money for old rope was the old saying, and I guess when you are in a solid, I guess when you're a solidier I think this comes back back to military times. Sorry, military in the old, you know, early 20th century, where people had old rope laying around.
Chris Haggart 2:09
Money for old rope,
Alex Hont 2:10
there was lots of it. So or maybe maybe even goes back further.
Chris Haggart 2:13
Ah, right. I see. So it's more likely right. So you got something just lying around. You can hand it over and someone will give you money for something you don't necessarily need.
Alex Hont 2:21
Chris Haggart 2:22
There you go
Alex Hont 2:24
I think we're going to run with money for jam and have it as a very quick and easy way to make to earn money with little or no effort.
Chris Haggart 2:32
Yes. Sounds good. So, how do we do it?
Alex Hont 2:35
Let's talk today about the spouse contribution. Yep, these aren't the big sexy, you know, get rich quick things but they can be very, very useful. So what do we know about a spouse contribution?
Chris Haggart 2:47
Well, you putting money into superannuation?
Alex Hont 2:51
Chris Haggart 2:53
No, no your spouses superannuation.
Alex Hont 2:55
That's right. So really, there's a few qualifying rules, but let's go, let's go with the benefit. First off, let's suck you in with the benefits. So, if you put in after tax contribution and it has to be an after tax or a non concessional contribution of $3,000, into your spouse's super, you can claim an 18% tax offset, which is worth $540. Right? So you basically put the money in, you get to claim, reduce your tax by $540
Chris Haggart 3:25
whilst boosting your spouse's superannuation balance by 3000.
Alex Hont 3:30
Yep. Now in order to qualify, what are the qualifying characteristics, Chris?
Chris Haggart 3:34
Right. So your spouse needs to receive $37,000 or less in total assessable income, which includes fringe benefits and employer super contributions.
Alex Hont 3:46
That's right. So even if you you know, if you're at $38,000, and you think I'll salary sacrifice $1,000 to get down to 37, that doesn't count because that doesn't work. Because that's added back. Yeah, that's right. Yep. And so what happens if you go over that 37? Can you still get it?
Chris Haggart 4:02
Well you can still get it but not up to $540. So it's graded down progressively as your spouse's income. So increases are just going to launch into another sentence then. So take, for example, at the moment, my wife, Naomi is not in paid employment because she's on mat leave. If they continue throughout the year, I could contribute $3,000 from our savings into her super, because that's going into her super after tax. There's no contributions tax going in. So we see the full $3,000 benefit going into her superannuation account. And then so when I lodge my tax return, I'll get a $540 tax offset. Yep. So we should probably have a quick discussion here about the difference between an offset and a refund
Alex Hont 4:51
or a deduction, was that what you meant? Yep, yep. So I think there's three, the three that we need to cover is offset, refunds and deductions. Yep. So let's go through Well, let's talk about this one offset as we start with an offset means that you can whatever you your tax is, you can reduce it by the amount of the offset so not not reducing your taxable income. This is reducing the actual tax that you have to pay.
Chris Haggart 5:16
So there's a tax calculation done. Tax accountant, tax accountant says X dollars of tax is payable, and then you take 540 off that.
Alex Hont 5:28
Yep, the offset comes off that Yep. Okay. What about a refund?
Chris Haggart 5:32
So refund, a bit like a franking credit is it's actually payable to you in physical cash or refund from the ATO.
Alex Hont 5:40
That's right. So franking credits, but also it franking credits. Yeah, that, no, sorry. You're right, exactly right. It's where you get a refund from the tax office. So might be that say you're in a no tax environment. And then you've got a franking credit that is say $1,000 will the ATO will give you $1,000 back whereas an offset will just reduce your tax to zero but you won't actually get the cash benefits. So that's that's the difference.
Well, if you have if you're not paying any tax and you have offsets, you can't claim the offsets as a refund. I think that's the major difference.
Chris Haggart 6:11
Yep. So I guess one thing to consider here would be that if you're contributing $3,000 to your spouse's super and you're not in a taxable, taxable environment, well, then there's not really going to be much tax benefit and the offset, the only benefit will be obviously that you're increasing your spouse's super by three grand
Alex Hont 6:32
and you might qualify for the co-contribution which is covered in the next one.
Chris Haggart 6:36
Yeah I was going to leave that alone.
Alex Hont 6:37
Okay, so the last one is, is obviously a tax deduction. And this is different because this doesn't actually reduce the amount of tax you have to pay directly other than it reduces your taxable income. Right. So when you have negative gearing, when you take out an income protection policy for these are tax deductible expenses and they reduce your taxable income, which in turn reduces your tax. It doesn't offset tax
Chris Haggart 7:00
Correct. Well, yeah, well that got technical quickly.
Alex Hont 7:04
We started with the fun stuff and moved into the technical stuff later. But you know, that's a really good way to get some money for jam. Even though it's not actual money coming in, it's just less money going out.
Chris Haggart 7:16
Alex Hont 7:17
Alright, well, that covers that one off. Stay tuned for our next episode in this money for jam series coming up very shortly.
Thanks for listening to this episode of the masters of finance podcast. If you want to hear it again or hear any of our other episodes you can find us on iTunes, Stitcher, or Spotify. Or you can also head over to our website at www.moranfp.com.au to find all the episodes and some other material that we have for you. If you want to get in touch with either Chris or I, you can find us on social media or get in contact with us through the website. We hope you enjoyed this episode and look out for the next one coming soon.
Transcribed by https://otter.ai