The term 'super co-contribution' should really be labelled as 'free money'! But it is surprising how few people actually take advantage of this great benefit.
Super co-contribution has been a government initiative since 2005 to help grow the superannuation balances for low and middle income earners. If you earn less than $61 920, you can take advantage of the super co-contribution payment by making a maximum personal super contribution of $1000 into your super fund. The government will then match up to $1000 of your personal super contribution.
If you qualify for the co-contribution, you do not need to do anything other than make the actual personal super contributions to your super fund and lodge your income tax return. There is no separate form or application to complete. The personal super contribution must be paid into a complying super fund and must not have been claimed as an income tax deduction. You can contact your super fund to find out how to make such a contribution.
At the start of each tax year, organise with your payroll department to have $20 taken out of your pay each week as a post-tax contribution into superannuation. You will fi nd that this is a lot easier than trying to find $1000 in the last week in June.
The ATO outlines the two income tests you must satisfy to be eligible for the super co-contribution:
- the income threshold test
- the 10 per cent eligible income test.
The income threshold test
According to the ATO, if your total income (assessable income plus reportable fringe benefits total plus reportable employer super contributions less allowable deductions) is under the lower income threshold of $31 920 and you contribute $1000 post-tax into your super fund the government will match it with a further $1000. The super co-contribution gradually phases out to nil (by 3.333 cents per dollar) at the higher
income threshold of $61,920.
The 10 per cent eligible income test
The ATO outlines that at least 10 per cent of your total income (assessable income plus reportable fringe benefits total plus reportable employer super contributions) must come from employment-related activities and/or carrying on a business otherwise you will not be eligible for the co-contribution.
Example
Luke is an employee whose assessable income, reportable fringe benefits and reportable super contributions total $48 000. During the year he contributes $3000 as a personal super contribution to his super fund.
Luke will receive $465 from the government as a co-contribution calculated as follows:
$1000 - [($48 000 – $31 920) × $0.03333]
You are not entitled to a super co-contribution for any personal contributions you choose to claim and have been allowed as a tax deduction.
You need to provide your TFN to your super fund before it can accept any personal super contributions, including the superannuation co-contribution. There is no tax on these contributions. If you don't see any super co-contribution payment on your annual super fund statement (or it is different from what you have calculated) contact the ATO.