The government super co-contribution scheme is designed to help eligible low and middle-income earners grow their retirement savings. If you make personal after-tax contributions into your super fund, the government may also contribute an additional amount to your super account, up to a maximum of $500.
This can be a helpful way to give your retirement savings a boost, particularly if you are able to make extra contributions from your take-home pay during the financial year.
How does the super co-contribution work?
If you make a personal non-concessional contribution to your super fund, the ATO will assess whether you are eligible for a government co-contribution after you lodge your tax return.
You do not need to apply separately. If you qualify, and your super fund has your tax file number, the ATO will generally pay the co-contribution directly into your super account.
The amount you may receive depends on your income and how much you personally contribute. The maximum co-contribution is available to those who meet the lower income threshold and contribute enough from after-tax income. The entitlement gradually reduces as income increases and cuts out once income reaches the higher threshold for that financial year.
What counts as a personal after-tax contribution?
Personal non-concessional contributions are contributions you make from your after-tax income. This means money you have already paid tax on, such as from your take-home pay or savings.
These contributions are different from employer super guarantee payments, salary sacrifice contributions, or personal contributions you later claim as a tax deduction. If you claim a tax deduction for the contribution, it becomes a concessional contribution and will not count for the co-contribution.
You do not have to make one large payment. You can make smaller contributions throughout the financial year, provided they are received by your super fund by 30 June.
Who may be eligible?
To be eligible, you generally need to:
- make one or more personal after-tax contributions to a complying super fund
- meet the relevant income thresholds
- have at least 10% of your income from employment, business income, or a combination of both
- be under 71 years of age at the end of the financial year
- lodge a tax return
- have a total super balance below the relevant transfer balance cap at the end of the previous financial year
- stay within your non-concessional contributions cap
- not have held a temporary visa during the financial year, unless an exception applies.
The 10% income test is important. It generally means that at least 10% of your total income must come from employment-related activities or carrying on a business. Salary and wages, sole trader income, partnership business income and director fees may count. Income such as investment income, trust distributions, rental income, dividends or some lump sum payments may not count for this test.
Why it may be worth considering
For eligible people, the co-contribution can be a valuable incentive. It rewards the habit of making additional contributions to super and may help build retirement savings over time.
Even small, regular contributions can add up. For example, contributing throughout the year rather than waiting until June may make the strategy easier to manage from a cash flow perspective.
However, super rules can be complex. Contribution caps, income thresholds, tax treatment and eligibility rules can change over time. The right approach will depend on your personal circumstances, income, age, cash flow and retirement goals.
Before making extra super contributions, it is always recommended that you seek advice from a qualified advice professional, such as your accountant or financial adviser. They can help you understand whether the government co-contribution may apply to you and whether contributing extra to super is appropriate for your situation.
Source: Australian Taxation Office (ATO), “Super co-contribution”, last updated 2 August 2023.
https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/growing-and-keeping-track-of-your-super/how-to-save-more-in-your-super/government-super-contributions/super-co-contribution
If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.
This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.
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