How does it work?
The Government co-contribution is an initiative to help eligible low to middle income earners boost their retirement savings.
If your total income¹ is less than $35,454 p.a. and you make personal (i.e. after-tax) contributions to your super any time this financial year, the Government will match your contributions on a $0.50 per dollar basis up to $500. If your total income1 is less than $50,454 p.a. the Government’s matching rate will be reduced as per the table below.
Assuming you qualify, the Government will automatically match and forward the co-contribution to your super fund once you’ve:
- made an after-tax contribution, and
- submitted a tax return for the financial year in which you’ve made your
Note: This article has been prepared based on the law standing at the time of publication. Please speak to your Financial Planner before making any contributions to super for the purposes of securing a Government co-contribution.
1. Assessable income plus reportable fringe benefits and reportable employer super contributions.
What does it mean for me?
The Government co-contribution is an easy and cost-effective way to boost your retirement savings using some of your own money, and some of the Government’s money.
The potential downside is that you won’t be able to access your retirement savings until you’re eligible to access your super, which for most people will be at retirement age
How much will I receive?
How much you receive depends on your income. For example:
If your after-tax contribution for this financial year is $1,000
And your income is: Your Government co-contribution is:
$35,454 or less * $500
$38,454 $400
$41,454 $300
$50,454 or more ** $0
*If you total income is $35,454 or less, you can receive the maximum Government co-contribution of $500 once you’ve made an after-tax contribution of $1,000.
**If you earn above $35,454, the maximum Government co-contribution available reduces by $0.0333 for every $1 of total income above $35,454.
How do I know if I qualify?
To qualify for a Government co-contribution you must satisfy all of the following criteria:
- You make one or more after-tax super contributions during the financial year into a complying super fund or retirement savings account (RSA) and don’t claim a deduction for all of
- Your total income (minus any allowable business deductions) for the financial year is less than $50,454.
- 10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of
- You are less than 71 years old at the end of the financial
- You are not the holder of a temporary visa at any time of the financial year, unless you are a New Zealand citizen or holder of a prescribed
You lodge your income tax return for the relevant financial year
Strategy in action
John is 45 and he receives a $40,000 salary and no reportable fringe benefits. He salary sacrifices $2,000 into his superannuation, reducing his salary to $38,000. As John’s income is entirely from eligible employment, he satisfies the 10% rule (as above).
To calculate John’s maximum Government co-contribution entitlement:
| Step 1 |
Total of John’s assessable income, reportable fringe benefits and reportable employer super contributions. |
$38,000 + $2,000 = $40,000 |
| Step 2 | Subtract $35,454 | $40,000 – $35,454 |
| from the result | = $4,546 | |
| Step 3 | Multiply the result | $4,546 x 0.03333 |
| by 0.03333 | = $151 | |
| Step 4 | Subtract the result | $500 – $151 |
| from $500 | = $349 |
John’s maximum Government co-contribution entitlement is $349. To receive his maximum co-contribution, John must make a personal contribution of $698 before the end of the financial year and lodge a tax return for the year of the contribution.
Add the Government co-contribution ($349) to John’s personal contribution ($698) and his super account balance is $1,047 better off.
Contact Aspect Wealth Advisers for further information (and for an assessment on what you may receive) on +61 7 3354 9000 or visit aspectwealthadvisers.com.au