Boosting Your Superannuation with Government Co-Contributions
If you’re looking to enhance your superannuation savings, you may want to consider the government co-contribution scheme. This initiative is designed specifically to assist low and middle-income earners in boosting their super by providing a matching contribution when they make after-tax contributions to their super fund.
What is the Government Co-Contribution?
The government co-contribution scheme enables eligible individuals to receive a contribution from the government, up to a certain amount each financial year. This contribution is a great way to increase your super savings, especially if you’re making after-tax contributions.
Who is Eligible?
To qualify for the government co-contribution in a financial year, you need to meet a few criteria:
- Income Threshold: Your total income must be below a specified amount.
- Employment Income: You should earn at least a portion of your income from employment or business activities.
- Personal Contribution: You must make an after-tax contribution to your super fund.
- Age Limit: You need to be under a certain age (currently 75 years).
- Super Balance: Your total super balance must be below a specified amount as of June of the previous financial year.
- Tax Return: You must lodge a tax return for the financial year.
How Much Can You Receive?
The government matches 50 cents for every dollar you contribute, up to a maximum co-contribution amount each year. For example, if you make an after-tax contribution of $1,000, you could receive a maximum co-contribution of $500. However, this amount gradually decreases as your income increases, phasing out completely at higher income levels.
Co-Contribution Examples
- Total Income: Up to $45,000
- After-Tax Super Contribution: $1,000
- Maximum Co-Contribution: $500
- Total Income: $50,400
- After-Tax Super Contribution: $666
- Maximum Co-Contribution: $333
- Total Income: 55,400
- After-Tax Super Contribution: $333
- Maximum Co-Contribution: $166
- Total Income: $60,400
- After-Tax Super Contribution: $0
- Maximum Co-Contribution: $0
How to Make a Contribution
To receive the government co-contribution, follow these steps:
- Make an After-Tax Contribution: Ensure your contribution is a non-concessional (after-tax) super contribution.
- Payment Methods: Use payment options like BPAY or direct deposit through your super fund.
- No Tax Deduction: Remember not to claim a tax deduction for the contribution you make.
Case Study: Andrea
Let’s take a look at a simple example. Andrea is a part-time worker earning $50,400 a year. Her financial adviser suggests she set up a direct debit of $26 per fortnight to her super fund. By the end of June, Andrea has contributed a total of $666. When she lodges her tax return, she automatically qualifies for the government co-contribution of $333, boosting her super savings.
How a Financial Adviser Can Help
A financial adviser can play a crucial role in helping you navigate the government co-contribution scheme:
- Eligibility and Strategy: They can determine your eligibility and suggest the optimal contribution amount to maximise your co-contributions while staying within the limits.
- Tailored Retirement Strategies: Advisers can provide retirement savings strategies that align with your financial goals.
If you’re looking to optimise your superannuation strategy and maximise your government co-contribution, consider reaching out to Acton Wealth today. Their expertise can help you make the most of your retirement savings.
