Explained: Government co-contribution strategy

Financial adviser Luke Smith tells how the government co-contribution strategy can help you grow your wealth and protect your financial future in this extract from his book Smart Money Strategy.


The government co-contribution strategy is where the government will make a contribution to your superannuation account if you’re eligible. This strategy was created by the government to help employees with lower income boost their superannuation for their retirement.

How does it work?

To be eligible for a government co-contribution, you must earn less than $57,016 (at the time of writing). You must also make a non-concessional contribution to your superannuation account – that is, a contribution where no tax deduction is claimed. If a tax deduction has been claimed, you won’t be eligible.

The maximum amount of a government co-contribution that you can receive is $500, which is available to people who make a non-concessional contribution to their super of $1000 and earn $42,016 or less.

If your income is between $42,016 and $57,016, your maximum government co-contribution will reduce as your income rises.

When to do it?

If eligible, you need to make a personal non-concessional contribution to your super before the end of the financial year and then complete your tax return after the end of the financial year. Once your tax return has been completed and your eligibility has been assessed, the government will make the co-contribution to the nominated superannuation fund (the one that received your personal contribution).

Do consider a contribution strategy:

  • when you’re in your first job; that is, you start work for the first time
  • if you’ve got a part-time job and earn less than the cut-off threshold
  • if you have kids or a partner earning less than $57,016. Why not gift them money so they can make an additional contribution to their retirement savings and receive the government co-contribution as well?

Don’t fall into these traps:

  • forgetting about the eligibility criteria and income thresholds. These can change, so please seek advice or visit the ATO website to confirm your eligibility
  • making a concessional contribution to your super and expecting to receive a tax deduction as well as a government co-contribution. Government co-contributions only apply when you meet the criteria, which includes making a non-concessional contribution to your super fund.

Every bit helps

Small gestures repeated often make a big difference. Let’s say for 20 years of your adult life you’re eligible for the maximum government contribution – that’s $1500 a year, with your $1000 contribution and the government’s $500 co-contribution. Over 20 years that adds up to $30,000 without any investment earnings added. I’m sure there’s a lot you who could do with an extra $30,000.

The superannuation strategies

The same principle goes for your everyday saving. A little bit here and a little bit there all add up when you’ve got the benefit of time on your side. It’s a pity that the government co-contribution only applies to super!

I also encourage parents to use the idea of co-contribution from time to time (not necessarily to superannuation) with their teenagers and young adult kids when they’re saving for something. Perhaps they’re saving for their first car or an overseas trip. If they put in, you put in.

If they don’t, then you don’t. It helps reward good behaviour and helps them achieve their goal without completely relying on you.

Have you used the government co-contribution strategy? Do you agree with Luke’s thoughts about encouraging kids to save? Why not share your opinion in the comments section below?

Also read: Explained: Spouse contribution strategy

Luke Smith is also a licensed financial planner and the director of Envision Financial, a financial planning advice business he founded in 2016 in Canberra. He says we have become a society of haves and have-nots and believes the key to closing the gap is financial planning education.

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