You may be eligible for a superannuation boost from the government, writes Anna Kennedy.
Receiving $500 tax-free may sound too good to be true, but the Australian government will give it to lower income workers in what's termed a “superannuation co-contribution”, if they qualify.
You don’t have to apply for this benefit or fill in any extra paperwork. You get it just by meeting the requirements, which is determined when you lodge your tax return. But you do need to make an after-tax contribution to your super in the current financial year, and it’s probably worth it.
According to Money magazine's Editor, Effie Zahos, “A guaranteed 50 per cent return with no risk seems like a no brainer to me. The co-contribution is a great way to boost your nest egg without too much pain.”
Just how much difference can $500 make?
Linda earns $35,000 a year, and currently has a $10,000 super balance, but decides not to make extra contributions, happy with the compulsory amount her employer pays into her fund. Over five years her super account balance grows from $10,000 to $28,000.
Greg also earns $35,000 a year. After tax he contributes $1,000 into his superannuation fund of $10,000, which he does for five years. Because of these voluntary contributions, each year Greg is entitled to a maximum yearly co-contribution from the government of $500. So in those five years his super balance goes from $10,000 to $35,000.
Meaning the extra $5,000 you tip in over five years could become $7,000 with the co-contribution.
Calculations based on the following assumptions. Starting balance of $10,000. Conservative fund growth of 4% per annum. Earnings calculated on Superannuation Guarantee and non-concessional contributions invested for full financial year. Earnings on co-contributions are calculated based on co-contribution invested on 1 January, after the financial year in which the non-concessional contribution is made. Super Guarantee contributions remain at 9.5% Annual salary remains at $35,000 and remains under the lower threshold for Government Co-Contribution during this time. Government Co-Contribution scheme remains the same.
How do you get it?
The government will pay the co-contribution directly into your super account after you've lodged a tax return for the financial year you made the contribution.
To be eligible you need to:
- earn less than $51,021
- be an Australian citizen, a permanent Australian resident or a New Zealand citizen working in Australia
- be less than 71 years of age as at 30 June
- have made an after-tax contribution to your super
- earn 10 per cent or more of your total income from carrying a business, eligible employment or a combination of both
- include any information required in relation to the co-contribution in your tax return.
How can I make a contribution?
For ANZ Smart Choice Super customers, making a contribution is as easy as a simple BPay payment.
Biller Code - 169060
Reference Code - Member Number - This is the combination of your ANZ Smart Choice Super BSB and account number.
Superannuation is a long-term investment structure and the rules and regulations governing it are subject to change. ANZ recommends that you keep informed of changes to superannuation and any potential impact any changes may have.
All case studies are hypothetical and are not meant to illustrate the circumstances of any particular individual. Taxation law is complex and this information is our interpretation of the law. It has been prepared as a guide only and does not represent tax advice. You should seek independent tax advice specific to your individual circumstances from a tax adviser or registered tax agent.
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