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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 is less than $34,4881 p.a. and you make personal (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 $49,4881 p.a. 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 income. For example: If your after-tax contribution for the 2014/15 financial year is $1000

And your income is: Your government co-contribution is:
$34,488 or less  $500
$37,488 $400
$40,488 $300
$43,488  $200
$46,488  $100
 $49,488 or more $0

If your total income is $34,488 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 $34,488, the maximum Government co-contribution available reduces by $0.03333 for every $1 of total income above $34,488.

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 financial year is less than $49,488.
  • 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

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 2014/15 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 $34,488 from the result.

$40,000 – $34,488 = $5,512


Step 3. Multiply the result by 0.03333

$5,512 x 0.03333 = $184


Step 4. Subtract the result from $500

$500 – $184 = $316
 

  • To receive his maximum co-contribution, John must make a personal contribution of $632 (2 x $316) 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 $316.
  • Add the Government co-contribution ($316) to John’s personal contribution ($632) and his super account balance is $948 better off.
Super balance  
Government $316
John's contribution $632
Total $948
Things you should know

1. In the 2014/15 financial year.

2. Assessable income plus reportable fringe benefits and reportable employer super contributions.

This information is general advice only and does not constitute any recommendation or personal advice. It has been prepared without taking account of your objectives, financial situation or needs. It is current at the time of publication 15 January 2015, and is subject to change.

The taxation position described is a general statement and should only be used as a guide. It does not constitute tax advice and is based on current tax laws and our interpretation. It has not been prepared by a registered tax agent. You should seek independent professional tax advice from a registered tax agent about any liabilities, obligations or claim entitlements that arise, or could arise, under a taxation law.

This information may contain material provided by third parties and is given in good faith and has been derived from sources believed to be accurate at its issue date. Information that has been provided by third parties has not been independently verified and the Westpac Group is not in any way responsible for such information.

This document provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. The information provided is factual only and does not constitute financial product advice. Before acting on it, you should seek independent financial and tax advice about its appropriateness to your objectives, financial situation and needs. The tax position described is a general statement and is for guidance only. It has not been prepared by a registered tax agent. It does not constitute tax advice and is based on current tax laws and our interpretation. Your individual situation may differ and you should seek independent professional tax advice. BTFM’s financial services guide can be obtained by contacting your adviser, calling 1300 657 010 or visiting bt.com.au. Superannuation is a long-term investment. The government has placed restrictions on when you can access your preserved benefits. The Government has set caps on the amount of money you can add to superannuation each year on a concessionally taxed basis. In addition, the government has set a non-concessional contributions cap. For more detail, speak with a financial adviser or visit the ATO website. This information may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be accurate as its issue date. It should not be considered a comprehensive statement on any matter nor relied upon as such. While such material is published with necessary permission, no company in the Westpac Group accepts responsibility for the accuracy or completeness of, or endorses any such material. Expect where contrary to law, we intend by this notice to exclude liability for this material. All case studies are not real life examples and are for illustrative purposes only. BT14897F-0714lm

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