If your income is under a certain threshold, then making personal after-tax super contributions could enable you to qualify for a Government co contribution and take advantage of the low tax rate payable in super on investment earnings.
How does the strategy work?
If you earn¹ less than $51,813 pa (of which at least 10% is from eligible employment or carrying on a business) and you make personal after-tax super contributions, the Government may also contribute into your super account.
This additional super contribution, which is known as a co-contribution, could make a significant difference to the value of your retirement savings over time.
To qualify for a co-contribution, you will need to meet a range of conditions, but as a general rule:
The Australian Taxation Office (ATO) will determine whether you qualify based on the data received from your super fund (usually by 31 October each year for the preceding financial year) and the information contained in your tax return.
As a result, there can be a time lag between when you make your personal after-tax super contribution and when the Government pays the co contribution.
If you’re eligible for the co-contribution, you can nominate which fund you would like to receive the payment.
Alternatively, if you don’t make a nomination and you have more than one account, the ATO will pay the money into one of your funds based on set criteria.
Note: Some funds or superannuation interests may not be able to receive co-contributions. This includes unfunded public sector schemes, defined benefit interests, traditional policies (such as endowment or whole of life) and insurance only superannuation interests.
Other key considerations
SUPER TIP – Simple explanation of super strategies:
The following links are other super tips – click below
Convert your super into a tax-effective retirement income
Top up your income when cutting back work
Make insurance more affordable
Convert business capital into tax-free retirement benefits
Sacrifice pre-tax salary into super
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It's also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.