Features – The Super Co-contribution - don't miss the boat!
The federal government's co-contribution scheme is designed to give lower income earners a boost to their super, but you've got to do your bit in order to be eligible. Find out if you qualify and how you can take advantage of this super bonus.
What is the Super Co-contribution?
The Super Co-contribution is an incentive offered by the federal government to help people on lower incomes boost their retirement savings. For every $1 that you chip in to your own super in the way of personal after-tax contributions, the government will chip in up to $1.50. Of course, conditions and eligibility criteria apply.
Firstly, to be eligible, your total income must be less than $58,000 and you must make one or more personal contributions to your super during the financial year. The co-contribution payment amount is based on an income range. In this range, $58,000 is the upper threshold, while $28,000 is the lower threshold. Those earning less than $28,000 can qualify for the maximum co-contribution amount of $1,500. Thereafter, the closer your income level gets to the upper threshold of $58,000, the smaller your potential co-contribution.
Key points in this article:
The federal government's super co-contribution can help people on lower incomes to boost their super.
To qualify, you need to earn less than $58,000 a year, and you need to make a personal contribution to your own super (by 30 June 2007), which the government will match according to a payment scale based on your income and the size of your personal contribution. Other criteria also apply (see article).
From 1 July 2007, self-employed people will also be able to qualify for the co-contribution.
If you qualify, the co-contribution is paid directly into your super account to boost your retirement benefit.
Am I eligible for the Super Co-contribution?
Let's look more closely at the eligibility criteria to see if you qualify for the Super Co-contribution this year. Take our quick Super Co-contribution pop quiz to find out!
Yes
No
1
Have you made a personal contribution to your super this financial year? If you make a personal, after-tax contribution to your super by 30 June 2007, you could qualify for the co-contribution. Personal after-tax contributions are contributions that you make into your own super account from your after-tax salary (the Australian Tax Office calls them "non-concessional" contributions). They could be a regular payment that you make after you get each pay, or a one-off payment that you make if you receive an unexpected windfall or suddenly find yourself with a lump sum that you want to put towards your super.
Note that salary sacrifice contributions (i.e. contributions that come out of your pay before you pay income tax on that money) do not qualify for the co-contribution, nor do the compulsory Superannuation Guarantee contributions that employers must make on behalf of their employees.
2
Have you earned at least 10% of your income as an employee in this financial year? Even if you are not actually entitled to receive employer super contributions from your employer, as long as you have earned at least 10% of your income while an employee of a business or company, you may still be eligible for the co-contribution.
3
Is your total income less than $58,000 in this financial year? The Tax Office considers your "total income" to be your assessable income plus any reportable fringe benefits.
4
Will you be under 71 years of age as at 30 June 2007?
5
Will you lodge an income tax return for this financial year?
6
Are you a permanent resident of Australia?
If you answered "yes" to all of the questions in our pop quiz, then you're eligible to receive a co-contribution payment from the government for this financial year.
What if I'm self-employed?
Although previously not eligible to receive the co-contribution, from 1 July 2007, if you're self-employed, you will be eligible if:
you earn 10 per cent or more of your income from carrying on a business, eligible employment or a combination of both;
your total income is under the upper threshold of $58,000 (as explained above); and
you are less than 71 years of age at the end of the financial year and you are not a temporary resident at any time during the financial year.
How much would I get?
If you're eligible to receive a co-contribution, the size of the payment you'd receive depends on two things:
the size of the personal after-tax contribution you make into your own super account;
your total income (i.e. your assessable income plus any reportable fringe benefits).
For example, if you earned less than $28,000 in this financial year and you made a personal, after-tax contribution of $1,000 into your super account, you would qualify for the full $1,500. But beyond the $28,000 income mark, the co-contribution rate decreases, i.e. the amount the government contributes for every dollar you contribute. And remember, for those earning $58,000 or more, it cuts out completely.
The following table shows how the Super Co-contribution differs depending on income levels and the amount of the initial personal, after-tax contribution that was made.
If your personal, after-tax super contribution is...
$1,000
$800
$500
$200
And your income is:
...then your Super Co-contribution will be:
$28,000 or less
$1,500
$1,200
$750
$300
$30,000
$1,400
$1,200
$750
$300
$32,000
$1,300
$1,200
$750
$300
$34,000
$1,200
$1,200
$750
$300
$36,000
$1,100
$1,100
$750
$300
$38,000
$1,000
$1,000
$750
$300
$40,000
$900
$900
$750
$300
$42,000
$800
$800
$750
$300
$44,000
$700
$700
$700
$300
$46,000
$600
$600
$600
$300
$48,000
$500
$500
$500
$300
$50,000
$400
$400
$400
$300
$52,000
$300
$300
$300
$300
$54,000
$200
$200
$200
$200
$56,000
$100
$100
$100
$100
$58,000
$0
$0
$0
$0
Source: Australian Tax Office
How will I receive the payment?
The Tax Office automatically determines your eligibility for the co-contribution when you submit your tax return. If you are eligible, the Tax Office will pay the co-contribution directly to your super fund on your behalf. (If you wish, you can nominate an alternative super fund to receive the payment in your income tax return.)
When will I receive the payment?
The co-contribution is payable after:
you've lodged your income tax return;
your super fund has lodged a member contributions statement for you (with the Tax Office); and
the Tax Office has received any additional information that may be required.
When you make a contribution during the financial year (i.e. the year starting on 1 July 2006 and ending on the following 30 June 2007), your super fund will usually report this to the Tax Office by 31 October 2007. For example, if you made a contribution on 1 May 2007, your super fund will report it by 31 October 2007. In most cases, the Tax Office would then arrange to pay your co-contribution within 60 days. Once the payment has been made, the Tax Office will send you a letter of confirmation.
Could I get the co-contribution next year?
Yes. For each year that you are eligible, providing that you fulfil all the requirements, such as making the required personal super contributions and lodging an income tax return etc, you will receive the Super Co-contribution. So, even if you received a co-contribution this year, you could still receive another next year. And, if you didn't qualify this year, if your circumstances change, you may qualify next year.
More information
To find out more about the Super Co-contribution, visit the super section of the Tax Office website:www.ato.gov.au/super
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