Super co-contributions continue to confuse

Question: I am 52, do not work and have an annual income of about $20,000 from interest, dividends and rent. Am I eligible for the government's co-contribution or the low-income health card? And am I eligible to claim a tax deduction for super contributions?

Answer: To be eligible for the superannuation co-contribution your income must be below $58,890. Your taxable income must also include at least 10% of employment or business income. As you will not receive employment or business income you will not be eligible for the co-contribution but you should be eligible for the low-income health card.

By not being in receipt of employment income you will be eligible to make a tax-deductible self-employed super contribution. However, the tax benefit you receive will be minimal.

On income between $6000 and $20,000 tax is paid at 15% plus the Medicare levy of 1.5%, while tax is paid on deductible super contributions at 15%.

Q: I understand that people under 65 whose employment income is less than 10% of their total assessable income can make a super contribution as a self-employed person. So does that mean that share traders/investors (who do not pass the 40-hour work test) can claim a tax deduction if they make a super contribution, until they turn 65? Then would they have to find a 40-hour job to be able to continue to contribute to super?

A: An investor who has employment income of less than 10% of their total assessable income can claim a tax deduction for a self-employed super contribution. Once they turn 65 they must find employment, or start a business, that means they are working at least 40 hours in one consecutive 30-day period in the year the contribution is made.

Q: I am 62, working full-time and have an existing Transition to Retirement Pension. I plan to start a second TTRP from my accumulation account into which I am salary-sacrificing and also making other contributions. For ease of administration, I would like to combine the two TTRPs. How do I do this - I thought my first TTRP was non-commutable? Are there any tax disadvantages?

A: There is a ban on commuting TTRPs to cash, but they can be commuted back into accumulation phase. This means you could commute you first TTRP, roll it back into your accumulation account, then commence a new TTRP from the combined accounts.

If your current TTRP has a large percentage of exempt tax-free superannuation you should consider keeping it going and start a new TTRP from the accumulation account. By doing this, the tax-free percentage of you current TTRP will be preserved.