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Government Co-Contribution to Super

11.10.2019 by Neville Hughes

It may not be as generous as it once was, but the numbers still add up for the Government co-contribution – which is effectively a free hit for your super if you earn less than $53,564 p.a.

If you're a low or middle-income earner and make personal (after-tax) contributions to your super fund of $1000, the government also makes a contribution (called a co-contribution) up to a maximum amount of $500.

Who can get it?

In 2019/20, the people who stand to gain most from the co-contribution are those who will earn less than $38,564 this financial year.

If that’s you, you can receive the maximum $500 co-contribution by making a $1,000 after-tax contribution to your super before 30 June 2020. After-tax contributions are those that come from you and not your employer, so salary sacrifice contributions don’t count.

If you earn more than $38,564 and less than $53,564, you can still receive some co-contribution but the amount you receive decreases on a sliding scale.

To be eligible, you need to be earning at least 10% of your income from employment. If you’re retired and earning only income from investments, you are not eligible for the co-contribution.

What difference will it make?

The fact remains that many people need to boost their super to achieve a comfortable retirement, so any additional assistance is a great help.

It’s also worth remembering that it’s not all about the free money. The combination of your additional contributions and the bonus contributions means your super is growing at a much faster rate.

Case study

Ingrid is age 45 and earns $30,000 p.a. working part-time. Her current superannuation balance is $50,000. If Ingrid relies only on her employer’s Superannuation Guarantee (SG) payments, $2,850 will be added to her super balance this financial year. If Ingrid makes a $1,000 after-tax contribution before 30 June 2020, she will be eligible for the maximum $500 Government co-contribution.

Important tips

You need to lodge your tax return to receive the Government co-contribution. If someone is doing this for you on your behalf (such as your accountant), be sure to notify them so it is elected on your tax return. Co-contributions are usually processed in February the following year.

Many super funds have electronic cut-off dates well before 30 June so be sure not to leave any important super contributions to the last minute.

This information is general information only. You should consider the appropriateness of this information with regards to your objectives, financial situation and needs.

GTC Financial Services Pty Ltd ABN 69 596 897 575 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523

 

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Topics Superannuation, Personal Financial Planning

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