Making Government Co-Contributions (with after-tax income)

Increasingly I think we’re all aware that the cost of living just keeps rising. The café latte that used to be two dollars back in your student days now sets you back $4.50 or more! Sure wages have also risen but few would say their wage goes up in line with increases in goods and services.

When you’re working it’s easier to shoulder these costs but what about when you retire, unfortunately the world isn’t static even if your income is. An alarming percentage of Aussies are not really prepared for retirement financially.

The government is in tune with this, in fact an aging population is looming as one of the greatest areas of policy concern. If the aging population is not secure financially the added burden on the public purse and the current generation of tax payers will be acute.

The government sees the logic in incentivising people to contribute to their super with after tax income and to that end they are prepared to co-contribute. It’s a bit like when you were a kid and your parents would say we’ll match whatever you put in your money box so you have double.

Now I suppose the first question on your lips is, how much can I get? Well if you’re a low income worker they’ll put in 50 cents for every $1 you contribute, up to a maximum of $500. So you put in $1000, they’ll add $500 and you’ve got a $1500 total which is a significant addition that is likely of course to become more significant over time.

The co-contribution does become less as your income increases and thus its aim and incentive is to help the people who are most in need, especially if they are prepared to make financial sacrifices now. The following table gives some figures around this.

2015/2016 thresholds:

Total income for the financial year

Maximum government co-contribution available

After-tax contribution required to attract maximum government co-contribution

$35,454.00

$500.00

$1,000.00

$40,000.00

$348.00

$696.00

$42,500.00

$365.00

$530.00

$45,000.00

$182.00

$364.00

$47,500.00

$99.00

$198.00

$50,454.00

$0

$0


You have to have provided your super fund with your tax file number.There are a couple of things to keep in mind before you go ahead and start making contributions, i.e. make sure you’re eligible.

  • You have to lodge a tax return at the end of the financial year.
  • Your total income has to be less than $49,488
  • You have to make an after tax contribution to your super fund in this financial year.
  • You earn at least 10% of your income from eligible employment or your own business
  • You are a permanent resident

Meet these criteria and you could be good to go.

If you would like additional general information on how to benefit from the government co-contribution then contact a Rate Detective consultant to find out more.

Published on June 6-th, 2015 in Superannuation
Damon Rasheed is the CEO of Rate Detective, an Australian financial service comparison sites specialising in Life Insurance, Income Protection Insurance and home loans. Damon holds a Master's Degree in Economics from the University of Melbourne and has been involved in many start-up internet businesses.