Superannuation co-contributions

How much? |  How do I get the co-contribution? |  Low income boost

Early into the millennium, the government was so concerned that we weren't saving enough to fund our retirements that it offered to chip in. The catch was that we were expected to volunteer to put aside more of our own money. The generous offer kicked in an extra $1.50 for every after-tax dollar we ourselves put aside for super (up to a limit). It has since been pulled back to 50 cents for every dollar contributed.

The superannuation co-contribution scheme launched in July 2003, and is still helping people save more for their retirement.  If you are eligible and make personal super contributions into a complying super fund or retirement savings account from after-tax income, the government will match your contribution with a co-contribution.

This is on top of compulsory employer contributions as well as any salary sacrifice super top-ups you may have arranged. But the co-contribution doesn't apply if you claim a tax deduction for these personal super contributions (as for the self-employed).

But every little bit helps, and it is important to remember that you can contribute very small amounts and still qualify for a government co-contribution. In the 2005-06 year the government even announced a one-off doubling of entitlements for that year, and soon after made the co-contribution hand-out available to the self-employed.

To qualify you need to be younger than 71, have lodged an income tax return, and not have held a temporary resident visa any time during the year.

How much?
The maximum co-contribution has reduced from $1,000 to $500, the result of scaling back the co-contribution rate to 50% of a personal contribution and is available if your total income is $31,920 or less, but reduces as income increases, phasing out completely at $46,920.

These income thresholds comprise your assessable income (basically, gross income that is taxed before deductions are taken into account), reportable fringe benefits and 'reportable employer superannuation contributions (RESCs). To qualify for co-contributions, at least 10% of this total income must be income you earn as an employee or from self-employment.

RESCs are super contributions by your employer where you could influence the size of the contribution or the manner in which it is made, and which reduces your assessable income (for example, salary sacrificed amounts).

How do I get the co-contribution?
You don't need to 'apply' for your co-contributions. The Tax Office will automatically pay it into the same super fund that your usual super amounts are directed to, and will send you notice it has done so. You can make your personal super contribution in smaller regular amounts through the year, or in a lump sum if preferred.

Low income boost
A new super tax refund has been announced for people who earn less than $37,000 (see more details here). The measure means that the government will contribute up to $500 to anyone who earns less than that amount and comes into effect from July 2012. It is referred to as a super 'tax refund' because the contribution basically covers any tax that is paid on compulsory super contributions (at a rate of 15%) while a low income earner would otherwise have a tax rate of less that that.

Last reviewed 3/08/2012

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