With the benefit soon to reduce, time is running out to make the most of the super co-contribution.
With the benefit soon to reduce, time is running out to make the most of the super co-contribution. Government superannuation co-contributions for low- and middle-income earners will be halved from July. The change means that the lead-up to June 30 will be the last opportunity many people have to use the benefit.Under the current rules, for people with income of $31,920 or less the government will match super contributions dollar for dollar, up to a maximum of $1000.The government will only match personal non-concessional (after-tax) contributions. But they will not match concessional contributions, such as super guarantee payments.Once income exceeds $31,920 the co-contribution tapers off until income reaches $61,920, when the benefit cuts out altogether.Under the proposed new rules, which take effect at the start of the new financial year, the government's co-contribution will be 50 cents for each dollar contributed by the fund member.As a result, from July 1 a fund member with income of less than $31,920 who puts in $1000 of personal contributions will receive a $500 co-contribution. The co-contribution reduces by 3.33 cents for each dollar in excess of that amount and cuts out at $61,920. The same taper rate will apply to the $500 next year, so that the co-contribution will cut out when income reaches $46,920.The head of technical services at OnePath, Andrew Lowe, says the change in the income level at which co-contributions cut out means that the current financial year (ending June 30) will be the last opportunity many people have to use the benefit."The co-contribution makes personal contributions very attractive in many circumstances," Lowe says.He says the government has cut its matching contribution from its original level of $1.50 for each dollar of personal contribution.When the government announced the change to the scheme last year it said low-income earners would benefit from a contribution tax refund scheme, to be introduced in the 2013/14 financial year.For those earning less than $37,000 a year the 15 per cent contribution tax on the compulsory contributions will be refunded.- To be eligible to receive a government superannuation co-contribution fund members must be under 71 years of age at the end of the financial year and must be eligible to contribute to a superannuation fund.- They must earn 10 per cent or more of their income from carrying on a business, being in eligible employment or a combination of the two.- The government will match personal non-concessional (after-tax) contributions only. If the member claims a tax deduction for all of their personal super contributions within the relevant financial year they will not qualify for a co-contribution.- Total income in the 2011-12 financial year must not exceed $61,920. Total income includes assessable income, reportable fringe benefits and employer super contributions.- The maximum co-contribution is paid on income at or below $31,920. The co-contribution reduces by 3.33 cents for each dollar in excess of that amount and cuts out at $61,920.- The co-contribution is not subject to contribution tax when it is paid to the member's fund. It is not counted as income in the member's tax return.- Earnings on the co-contribution will be taxed in the same way as any other earnings of the fund.- Receipt of the co-contribution is automatic. The Australian Taxation Office determines eligibility based on information provided by the super fund and from the member's income tax return.
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