What is a superannuation government co-contribution?

In securing a comfortable retirement, Australians have a number of strategies they can turn to boost their superannuation funds. One is making use of government co-contributions to inject a little extra cash into the money set aside for their retirement. 

Of course, first you'll have to know what these are and what they entail. Consider this your one-stop primer on government co-contributions. 

What is a superannuation government co-contribution?

First things first: What is the government co-contribution? 

A government co-contribution to your super is essentially free money - a handy addition of tax-free funds into a superannuation account provided by the federal government. Every time you make any after-tax superannuation contributions to your super fund, and as long as you qualify within the income threshold, the government will pay 50 cents for each extra dollar you contribute. This goes up to a maximum of $500.

The key thing to remember is that this is only for personal, after-tax contributions - those you make from your take-home pay. It therefore does not include any contributions you might make through salary-sacrificing, and nor does it include your employer contributions. 

Perhaps the most convenient part about this arrangement is that you don't have to worry about filling out any forms or making any time-consuming applications. According to the Australian Taxation Office, the government will make this co-contribution automatically without you having to lift a finger, as long as you're eligible and your tax-file number is linked to your fund. 

How do I know if I'm eligible?

The superannuation government co-contribution scheme only applies to those who earn, at most, $49,488 a year at the time of writing. However, be aware that the higher your income, the smaller your co-contribution will end up being, decreasing by 3.33 cents for every dollar above $34,488. 

According to calculations made by Australian Super, that means that if you make a $1,000 after-tax contribution: 

  • on an income of $34,488, your co-contribution will be the full $500
  • on an income of $40,488, it would be $300
  • on an income of the maximum threshold of $46,488 it would be $100

There are several more superannuation rules that determine whether or not you're eligible. For one, you must have earned 10 percent or more of your income from eligible employment, running a business or both. 

In addition to this, you must have been under 71 years old at the end of the financial year in which you made your after-tax contribution. 

Finally, unless you hold a prescribed visa or are a New Zealand citizen, you must not have held an eligible temporary resident visa at any point in this year. You also must have lodged an income tax return for the year. 

Before you make any extra contributions based solely on the promise of free money, it might pay to check first if you'll be eligible for the scheme. If so, enjoy your reward. 

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