Super Co-Contributions

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.

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