Government Co-contributions

How does it work?

The Government co-contribution is an initiative to help eligible low to middle income earners boost their retirement savings. If your total income² in the 2016/17 financial year is less than $36,021¹ p.a. and you make non-concessional (i.e. after-tax) contributions to your super any time this financial year, the Government will match your contributions by contributing 50 cents for each dollar contributed up to $500¹.

That’s a 50% tax-free return on your investment within one year. If your total income² is less than $51,021¹ p.a. in the 2016/17 financial year the Government’s matching rate will be reduced as per the table below. Assuming you qualify, the Government will automatically match and forward the co-contribution to your super fund once you’ve:

• Made an after-tax contribution, and
• Submitted a tax return for the financial year in which you’ve made your contribution.

How much will I receive?

How much you receive depends on your total income. For example: If your after-tax contribution for the 2015/16 financial year is $1,000:

If your total income is $36,021 or less, you can receive the maximum Government co-contribution of $500 once you’ve made an after-tax contribution of $1,000.

If you earn above $36,021, the maximum Government co-contribution available reduces by $0.03333 for every $1 of total income above $36,021.

Government co-contribution changes for the 2017/18 financial year

If your total income² in the 2017/18 financial year is less than $36,813³ p.a. and you make non-concessional (i.e. after-tax) contributions to your super fund any time this financial year, the Government will match your contributions by contributing 50 cents for each dollar contributed up to $500¹.

That’s a 50% tax-free return on your investment within one year. If your total income² is less than $51,813³ p.a. in the 2017/18 financial year the Government’s matching rate will be reduced as per the table below. Assuming you qualify, the Government will automatically match and forward the co-contribution to your super fund once you’ve:

• Made an after-tax contribution, and
• Submitted a tax return for the financial year in which you’ve made your contribution.

If your after-tax contribution for the 2017/18 financial year is $1,000:

How do I know if I qualify?

To qualify for a Government co-contribution you must satisfy all of the following criteria:

• You make one or more after-tax super contributions during the financial year into a complying super fund or retirement savings account (RSA) and don’t claim a deduction for all of them.
• Your total income (minus any allowable business deductions) for the 2016/17 financial year is less than $51,021 or $51,813 for the 2017/18 financial year
• 10% or more of your total income comes from eligible employment-related activities, carrying on a business or a combination of both
• You are less than 71 years old at the end of the financial year
• You are not the holder of a temporary visa at any time of the financial year, unless you are a New Zealand citizen or holder of a prescribed visa
• You lodge your income tax return for the relevant financial year

Strategy in action

Examples following are purely fictional and for illustrative purposes only to demonstrate how the rules work.

John is 45 and he receives a $40,000 salary and no reportable fringe benefits. He salary sacrifices $2,000 into his superannuation, reducing his salary to $38,000. As John’s income is entirely from eligible employment, he satisfies the 10% rule (as above).

To calculate John’s maximum Government co-contribution in the 2016/17 year:

Step 1. Total of John’s assessable income, reportable fringe benefits and reportable employer super contributions.

$38,000 + $2,000 = $40,000


Step 2. Subtract $36,021 from the result.

$40,000 – $36,021 = $3,979


Step 3. Multiply the result by 0.03333

$3,979 x 0.03333 = $133


Step 4. Subtract the result from $500

$500 – $133 = $376
 

• To receive his maximum entitlement to co-contribution from the Government, John makes a personal contribution of $734 (2 x $367) before the end of the financial year and lodge a tax return for the year of the contribution.
• John’s maximum Government co-contribution entitlement is $376.
• Add the Government co-contribution ($376) to John’s personal contribution ($734) and his super account balance is $1,101 better off.
   

To calculate John’s maximum Government co-contribution in the 2017/18 year:

Step 1. Total of John’s assessable income, reportable fringe benefits and reportable employer super contributions.

$38,000 + $2,000 = $40,000


Step 2. Subtract $36,813 from the result.

$40,000 – $36,813 = $3,187


Step 3. Multiply the result by 0.03333

$3,187 x 0.03333 = $106


Step 4. Subtract the result from $500

$500 – $1106 = $394
 

• To receive his maximum entitlement to co-contribution from the Government, John makes a personal contribution of $788 (2 x $394) before the end of the financial year and lodge a tax return for the year of the contribution.
• John’s maximum Government co-contribution entitlement is $394.
• Add the Government co-contribution ($394) to John’s personal contribution ($788) and his super account balance is $1,182 better off.