The super co-contribution scheme was introduced by the Australian government as a way to help eligible individuals boost their retirement savings.
If you are a low or middle-income earner and you make a non-concessional (after tax) contribution to your super fund, the Australian government will also make a contribution on your behalf, known as a government co-contribution, to your nominated super fund, up to a maximum of $500. It is a great incentive to encourage Australians to start saving for their retirement and can really help those individuals out who may not have such a large super balance.
The amount the government will contribute to your fund will depend upon your income and the amount you have contributed. Upon lodging your tax return, the Australian Taxation Office will work out your eligibility and if you have provided your super fund has your tax file number (TFN), they will pay it directly to your super account.
So how do you know if you qualify for a government co-contribution?
Well, there are a few requirements that need to be fulfilled in order for you to qualify for a government co-contribution. If you can answer yes to all the listed requirements below you will be eligible to receive a government co-contribution.
- You have made one of more eligible super contributions to your super account during the financial year.
- You pass the two income tests which are, the income threshold test and the 10% eligible income test.
- To fulfil the income threshold test your total income must be less than the higher income threshold for that financial year.
- For the purpose of this test, your total income is the sum of the following:
- Your assessable income for the financial year
- Your reportable fringe benefits total for the financial year
- Your total reportable employer super contributions for the financial year
- To satisfy the 10% eligible income test, 10% or more of your total income must come from employment-related activities, carrying on a business, or a combination of both.
- Generally, income that is employment related is salary and wages as well as business income earned as a sole trader or in a partnership, as well as director fees.
- You must be less than 71 years of age at the end of the financial year in which you make your after-tax contribution to be eligible for a government co-contribution
- You must not hold a temporary visa at any time during the year in which you make your after-tax contribution.
- You must ensure you have lodged your tax return for the relevant financial year.
- From the 1 July 2017, a new rule was introduced which state that, if your Total Superannuation Balance is equal to or greater than $1.6 million, then you will not be eligible for a government co-contribution. So, if your superannuation balance at 30 June of the previous financial year is less than $1.6 million you may still be eligible.
- Lastly, you must not have contributed an amount more than your non-concessional contribution cap for the relevant year.
It is important to note that you are not entitled to a government co-contribution for any personal contributions you made that has been allowed as a tax deduction. Other than that, if you fulfil all the above criteria, you will be eligible to receive a government co-contribution.
LifeTime Financial Group are specialist (holding appropriate accreditations)advisors who are ideally positioned to assist you in selecting and then managing your retirement funds.
Would you like to discuss your personal position further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733.
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Written by Hugo Sampson of LifeTime Financial Group. A leading privately owned Melbourne Financial Planning practice.