Super Co-Contributions

11 July 2017
Low income earners have a fantastic opportunity to bump up their retirement savings by taking advantage of the government’s co-contribution scheme. Even though it’s less generous than it was last year, it’s still money for nothing if you are eligible.

How Does the Super Co-Contribution Work?

Here’s how it works. If your total income is $33,516 or less in the 2013/14 financial year, you will receive a tax-free contribution when you make a non-concessional (after-tax) contribution to your super account. This is, of course, provided you satisfy work, income and age tests – but more about those later.

Please note that the income threshold test for the co-contribution is your total income, which calculated as follows:

Total income (assessable income + reportable fringe benefits + reportable employer super contributions – allowable business deductions).

If Your Income is $33,516 or Less…

If your total income is $33,516 or less, the federal government will pay 50 cents for every dollar you contribute to your super fund in after-tax dollars, capped to a maximum of $500 per year.

As such, if you make a $1,000 non-concessional contribution, your super fund receives a $500 tax-free contribution from the government. If you make a $600 contribution, the government pays $300 into your super fund.

If Your Income is > $33,516…

If you earn more than $33,516, your co-contribution entitlement reduces by 3.33 cents for every dollar you earn over $33,516. This cuts out at $48,516. So if you earn $40,000 and you make an after-tax contribution of $1,000, the government?s maximum contribution of $500 is reduced by $216. This potentially gives you a co-contribution of $284.

Super Co-Contribution & Your Tax

When you make the payment, it is important to be aware that the super co-contribution:

  • Is not subject to tax upon payment into your super fund;
  • Is not included as income in your tax return;
  • Is preserved in a super fund or RSA and can only be accessed when other preserved amounts can be accessed (for example, upon retirement)

Eligibility for the superannuation co-contribution

You must earn 10% or more of your income from eligible employment, or 10% or more of your income from carrying on a business, or a combination of both. You must comply with the work criteria and you must be under 71 at the end of the financial year in which you make your after-tax contribution to be eligible.

To find out more, talk to your financial adviser, super fund or check out the ATO website.

If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for Australians aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.

Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.

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