Ever wonder how you can better prepare yourself for retirement? Low or middle-income earners can give your super a nice boost – with very little sacrifice! Read on to find out how you can take advantage of the Federal Government’s superannuation co-contribution scheme.
What is it the government super co-contribution scheme?
The super co-contribution scheme is an incentive for low or middle-income earners to make voluntary (post-tax) contributions to their superannuation to better financially prepare them for retirement.
The government will then contribute a maximum of $0.50 for every dollar you contribute up to a maximum of $500 per year, depending on your income.
To access the scheme, you must meet the eligible criteria and have made one or more eligible personal super contributions to your super account during the financial year. This contribution is in addition to the compulsory super contribution paid by your employer.
Who is eligible for the super co-contribution?
The government co-contribution applies to taxpayers earning less than $60,400 (2024/25 financial year).
To be eligible, you must make your contribution from your after-tax income to your super fund before the 30th June each year and meet the following criteria:
- Earn less than $60,400 after allowable business deductions have been applied
- minus your assessable first home super saver released amount, if applicable
- pass the 10% eligible income test – 10% or more of your total income must come from either:
- employment-related activities
- carrying on a business
- a combination of both.
- be less than 71 years old at the end of the financial year
- not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
- lodge your tax return for the relevant financial year
How do I claim my super co contribution?
You don’t need to apply or claim the contribution, you simply need to ensure that you have topped up your super. The government automatically checks that your eligible and adds their contribution to your super fund.
The Government co-contribution is up to $500 for income below $45,400. Then for income up to $60,400, 3.33 cents per dollar is deducted from the amount the Government will match.
Your super fund can tell you how to make personal contributions. In some cases, you can make regular super contributions into your super account directly from your after-tax pay. Or if you prefer, you can add a lump sum deposit to your super fund in one go.
If the contributions come from your before-tax pay, they are generally referred to as salary-sacrificed contributions and will not qualify for the super co-contribution.
These small contributions can make a massive difference to your wealth later in life, because the government will add up to $500 per year on top of your own contributions.
What if I’m self-employed?
If you are self-employed you may also be able to claim for personal superannuation contributions you make to your super fund up to a certain amount. This varies depending on your individual circumstances and your contribution must be made by June 30 of each year. Send us an email on [email protected] and one of our accountants can provide you with further information based on your personal circumstances.
My income is greater than $60,400 : Am I eligible for Superannuation Co-Contribution?
If you earn more than $60,400, you are not eligible for the scheme. But, ask your employer about how you can salary sacrifice some of your pre-tax income into your super fund instead. This will reduce your annual taxable income meaning you pay less tax at tax time.
Want more information?
If you would like help working out how you can benefit from the super co-contribution scheme or more information about salary sacrificing please contact us by phone or email.
I am a low income earner, are there any other ways I can better plan for retirement?
Yes! If you’re a low-income earner, saving for your retirement can feel daunting, but the good news is that in addition to the Super Co-Contribution Scheme, the Australian Government have an additional program to help you prepare for retirement.
The Low Income Super Tax Offset (LISTO) is a government program designed to further help low-income earners save for their retirement.
In the simplest terms, if you earn $37,000 (or less) a year the government will make a payment of up to $500 directly into your super fund. You can read more about the LISTO and how you may be eligible here.
Note: The above article contains information that is general in nature and should not be considered detailed advice. Etax does not give financial advice about whether making additional superannuation contributions or entering into a salary sacrifice arrangement is appropriate for you. You should seek advice from a financial planner before making any decisions regarding your superannuation.
