Guaranteed 50% investment return
The Superannuation Co-contribution Scheme started in 2003/04 to encourage us to make personal contributions to superannuation. It was targeted at low to middle income earners and has been improved progressively since then.
In 2020-21, more than 391,000 Australians claimed over $121 million in co-contributions. A lot of people are taking advantage of this opportunity.
The thresholds
In the 2022-23 year, if you earn an income of $42,016 you can qualify for the maximum co-contribution. (Income = assessable income plus reportable fringe benefits.) The co-contribution reduces by 3.333c in the dollar for each dollar of income over $42,016 and cuts out when your income reaches $57,016.
To be eligible to receive the co-contribution you need to have a total superannuation balance of less than $1.6 million and have not exceeded your non-concessional contributions cap for that financial year.
If you are self-employed
The co-contribution is also available to self-employed Australians who earn at least 10% of their total income from employment or running a business. (Income = assessable income plus reportable fringe benefits less business income deductions.)
You must make a personal contribution without claiming a tax deduction for it. The Tax Office will work out the co-contribution amount from information on your tax return and details of contributions provided by your super fund.
A gift that will last a lifetime
Here’s a chance to give your children a unique gift.
As soon as they start work they could qualify for the co-contribution. But with retirement a long way off and other priorities (like having a good time) they are unlikely to want to part with $1,000 to pay into superannuation.
But what if you contributed it for them?
Assuming your son is 20 years old and earns less than $42,016, the government would match your contribution with $500. If you repeated this gift for five years and his super earned 7.5% he would have an extra $8,700 in savings. The power of compound interest means that by the time he reaches age 60, he would have an extra $109,000 in superannuation!
If you haven’t already taken advantage of this generous option, contact your licensed financial planner to learn how you might benefit from the super co-contribution scheme – for yourself or your loved ones.
For more information or to speak to one of our Financial Advisers please contact TNR Wealth Management on 02 6626 3000.
Disclaimer
Past performance is not a reliable indicator of future performance. The information and any advice in this publication does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. This article may contain material provided directly by third parties and is given in good faith and has been derived from sources believed to be reliable but has not been independently verified. It is important that your personal circumstances are taken into account before making any financial decision and we recommend you seek detailed and specific advice from a suitably qualified adviser before acting on any information or advice in this publication. Any taxation position described in this publication is general and should only be used as a guide. It does not constitute tax advice and is based on current laws and our interpretation. You should consult a registered tax agent for specific tax advice on your circumstances.
