Superannuation – Government Co-Contributions
For some years the Federal Government has operated a scheme to contribute money to certain individuals’ superannuation funds. These individuals are referred to as ‘low-income earners’. In many family groups, there are often such individuals, even if the overall group earns considerable income.
There is another Government scheme called the Low-Income Superannuation Tax Offset scheme. This article does not discuss this and should not be confused with the co-contribution scheme.
Under the co-contribution scheme, the Government will contribute 50 cents for every $1 contributed by an individual to their superannuation fund up to a maximum Government contribution of $500. It may not seem a lot, but it is free money from the Government. If you want to take advantage of this, there are some conditions applicable.
These are:
- Your income must be at least 10% from being an employee or 10% from conducting a business or both.
- Your total income (applicable for this scheme) must not exceed the higher income threshold.
- You must be under the age of 71 at the end of the financial year.
- You must lodge an income tax return for the year.
- Your ‘total superannuation balance' must not exceed the ‘general transfer balance cap’. This is currently $1.9 million.
- You have not held a temporary resident visa at any time during the financial year.
- You have made personal (non-deductible) contributions to your superannuation fund.
- Your non-concessional contributions do not exceed your non-concessional contributions cap
The way income is calculated is different for this scheme. The income level is the sum of your assessable income, your reportable fringe benefits and your reportable employer superannuation contributions.
To be clear, eligible personal contributions do not include your employer’s contributions nor contributions made to your superannuation fund by your spouse.
There is a phasing out of the concession between the lower income level and the higher income level. The lower income level for the year ending 30 June 2025 is $45,400. The higher income threshold is $15,000 more than the lower threshold, making it $60,400 for the
year ending 30 June 2025. The concession is phased out by 33.33% for every dollar above $45,400 until it is completely phased out at an income level of $60,400.
This would mean for a personal contribution of $1,000 to your superannuation fund:
- If your income (as calculated above) is equal to or less than $45,400, the Government would contribute $500 to your superannuation fund.
- If your income was $48,000, the Government would contribute $413.33.
- If your income was $60,400 or greater, there would be no contribution.
When the Government’s co-contribution is received by your superannuation fund it is not subject to tax in the fund.
To take advantage of this free Government money, all you need do is ensure you have made a personal contribution to your superannuation fund of $1,000 or above in order to maximise the benefit. Lower contributions will still provide you with some benefit.
You do not have to apply for a co-contribution. The ATO makes it happen from the records it keeps of your income and your superannuation account.