Government Co-contributions to your Superannuation - MoneyTalk
INVESTMENTS AND SUPERANNUATION

Government Co-contributions to your Superannuation

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BUT WAIT, THERE’S MORE…

Up until 30 June 2017, if you earn less than $37,000, the government will also make a 15 cent ‘Low Income Super Contribution’ for every dollar of concessional super contributions (that is ‘super guarantee’ contributions by your employer and/or ‘salary sacrifice’ contributions by you from pre-tax earnings) — up to another $500 co-contribution.

…subject to the same eligibility rules about work earnings, age, and residency.

How much contribution will they match? The short answer is: up to $1,000 each year. Interested?

If you earn less than $34,488 this year, and make a personal superannuation contribution — that is out of your after-tax income — the government will contribute 50 cents for every dollar you contributed, up to a co-contribution amount of $500 (assuming you’re eligible: see below).

So if you contribute $1,000 the government will add another $500 to your Super account. That’s like making a 50% return on your money, risk free.

In addition you may be eligible for the Low Income Super Contribution (see box to the right). That’s up to another $500. And you don’t even need to apply for it. The ATO will pay it automatically.

Do it year after year and harness the power of compound interest.

If you earn over $34,488 this year, the co-contribution is scaled back based on your income. The maximum $500 co-contribution is reduced by 3.33 cents for every dollar you earn above $34,488 — cutting out at $49,488.

For example, assuming you contribute $1,000 from your post tax earnings:

Your income                        Government contribution
$34,488                                                $500
$40,000                                                $316
$45,000                                                $150

To see exactly what your co-contribution would be, use ASIC’s Super co-contribution calculator. (If your income is under $37,000 you could also qualify for up to another $500 Low Income Super Contribution: see box to the right.)

Are you eligible?

To be eligible you must:

  • make an after-tax contribution in the current financial year (salary sacrifice contributions aren’t eligible)
  • earn at least 10% of your total income from employment or from running your own business
  • be a permanent resident aged under 71
  • lodge a tax return for last financial year.
What are your thoughts?

Is this government incentive attractive enough to you, that you’ll consider making an extra Super contribution in order to get it?

Did we leave anything out? Is there anything else you’d like to know about investing or superannuation?

Join the conversation — leave a comment below and let us know what you’re thoughts are.

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We will publish the aggregate results later in May 2015 in Investments and Superannuation and on FaceBook.

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Yellow Brick Road Financial Guru


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