How to get low income super contributions

It can be hard to save for your retirement if you’re a low-income earner. Guaranteed super contributions from your employer are based on a percentage of your pre-tax earnings, so low pay usually means a relatively low level of contribution.

One way to boost your super could be to add contributions from your spouse, if you are married or in a de facto relationship, and if that scheme works for you.

But there are government schemes in place to help low-income earners add extra to their super.

They include the low income super tax offset and government co-contributions. If you’re a low income earner, both schemes may help put more money into your super account.

What is the low income super tax offset?

The low income super tax offset (LISTO) will pay up to $500 a year into your chosen super fund, provided you meet certain eligibility criteria.

They include that you must earn $37,000 or less in a financial year and you and your employer must have paid before tax, concessional contributions to your super fund, including any super guarantee amount and any salary sacrifice contributions you made.

You also need to earn at least 10% of your income from an employer or some business activity.

The great thing about LISTO is the Australian Taxation Office (ATO) says you don’t have to do anything to apply for the money. So long as your super fund has your tax file number (TFN), if you meet the eligibility criteria then it says you will automatically get an amount added to your super fund.

That amount will be 15% of whatever concessional contributions were made to your super, up to a maximum of $500. The minimum you can get if you meet the criteria is $10 as the ATO says if your LISTO calculation comes in at less than $10, then it will round this up to $10.

Essentially, you are getting a refund of up to $500 on the 15% tax paid on concessional contributions.

For example, if you’re on the borderline and earn $37,000 a year, your employer should be making the 10% super guarantee contribution to your super fund, which is $3,700. Take 15% of that and you get $3,700 × 0.15 = $555. So if you meet all the LISTO eligibility criteria you could get the maximum $500 refunded to your super fund.

There are other considerations the ATO takes into account in determining if you are eligible for any payment. For a more detailed estimate of any LISTO entitlement you can use the ATO’s online LITSO calculator as a guide.

What is a super co-contribution?

Super co-contributions work by the ATO adding up to $500 to your super fund if you have made any non-concessional contributions, again, subject to you meeting certain eligibility criteria.

You need to be less than 71 years old by the end of the financial year and meet certain lower and higher income thresholds, which vary depending on the tax year. You also need to earn at least 10% of your income from an employer or some business activity.

Then, if you have made an additional after tax, or non-concessional contribution to your super, within the maximum caps allowed, the ATO says that when you lodge your annual tax return it will then determine if you’re entitled to a co-contribution.

If you tell your super fund your TFN the co-contribution can be paid directly into your account.

The actual calculation takes into account a number of factors and you can use the ATO’s super co-contribution calculator to get an estimate of the amount you might expect to receive.

Let’s take the example from before, where you earn $37,000 a year with $3,700 in superannuation guarantee from your employer paid into your super fund.

If you then add $50 a fortnight in non-concessional contributions for the tax year 2021/22, assuming you receive no other income or benefits, the ATO calculator says you could expect to receive $500 in a co-contribution payment.

The amount you are actually entitled to will be up to the ATO but so long as your income is below the maximum threshold for the financial year and you meet the criteria, you will be entitled to a minimum co-contribution of $20.

So that’s two ways as a low-income earner you may be able to add government contributions to your super.

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