Superannuation co-contributions explained

If you want to boost your savings for when you retire, the first place to start is with superannuation co-contributions. But do you understand how they work?

If you are a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution (called a co-contribution) of up to a maximum amount of $500.

The amount of government co-contribution you receive depends on your income and how much you contribute.

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You don’t need to apply for the super co-contribution. When you lodge your tax return, the Australian Taxation Office (ATO) will work out if you are eligible.

If the super fund has your tax file number (TFN), the ATO will pay it to your super account automatically.

The way your co-contribution is calculated depends on the financial year in which you made your personal super contributions.

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Are you eligible?
To be eligible you must:

  • have made one or more eligible personal super contributions to your super account during the financial year
  • pass the two income tests (income threshold and 10 per cent eligible income tests)
  • be less than 71 years old at the end of the financial year
  • not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa)
  • lodge your tax return for the relevant financial year
  • have a total superannuation balance less than the general transfer balance cap at the end of 30 June of the previous financial year
  • not have contributed more than your non-concessional contributions cap.

You are not entitled to a super co-contribution for any personal contributions you have made that have been allowed as a tax deduction.

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The 10 per cent eligible income test
To satisfy this test, 10 per cent or more of your total income must come from either:

  • employment-related activities
  • carrying on a business
  • a combination of both.

What are personal super contributions?
Personal super contributions are the amounts you contribute to your super fund from your after-tax income (that is, from your take-home pay). These contributions:

  • are in addition to any compulsory super contributions your employer makes on your behalf
  • do not include super contributions made through a salary-sacrifice arrangement.

To be eligible for the super co-contribution, your personal contributions need to be paid to a complying super fund. However, personal contribution amounts claimed (and allowed) as an income tax deduction will not be eligible for the co-contribution.

You do not need to make your personal contributions as a single lump sum – you can make payments throughout the financial year. The ATO uses the total amount that you have contributed for the year to calculate the co-contribution.

In some cases, you can make regular super contributions into your super account directly from your after-tax pay. If the contributions come from your before-tax pay, they are generally referred to as salary-sacrificed contributions and will not qualify for the super co-contribution.

Your personal contributions must reach your super fund by 30 June each year for you to receive a government co-contribution for that financial year.

Have you taken advantage of the super co-contribution scheme to boost your retirement savings? What do you think about the scheme? Tell us in the comments section below.

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Written by Ben Hocking

Ben Hocking is a skilled writer and editor with interests and expertise in politics, government, Centrelink, finance, health, retirement income, superannuation, Wordle and sports.

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