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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:

And your income is: Your government co-contribution is:
$36,021 or less  $500
$39,021 or less $400
$42,021 or less $300
$45,021 or less  $200
$48,021 or less  $100
$51,021 or more $0

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:

And your income is: Your government co-contribution is:
$36,813 or less $500
$39,813 or less $400
$42,813 or less 300
$45,813 or less $200
$48,813 or less $100
$51,813 or more $0

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.
     
Super balance  
Government $376
John's contribution $734
Total $1,101

 

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.
     
Super balance  
Government $394
John's contribution $788
Total $1,182
Things you should know

1. In the 2016/17 financial year.

2. Assessable income plus reportable fringe benefits and reportable employer super contributions. You can find out more at www.ato.gov.au

3. In the 2017/18 financial year.

This information is current at the time of publication 30 April 2017, and is subject to change.

This information provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This information does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to your personal objectives, financial situation and needs having regard to these factors before acting on it. BTFM’s financial services guide can be obtained by contacting your adviser, calling 1300 657 010 or visiting bt.com.au.

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.

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. Except 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.

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