Government Super Co-Contribution

The super co-contribution is a payment made by the Commonwealth Government into your superannuation account to encourage you to save for retirement.

From 1 July 2009 if you contribute $1,000 to your super account then the Government will match this contribution as follows.

You will receive the maximum rate if your assessable income and reportable fringe benefits is less than $30,342.  The super co-contribution progressively reduces for assessable incomes over this amount and phases out at total assessable income of $60,342.

To be eligible you must meet ALL of the following criteria:

• Make personal superannuation contributions (providing they are not salary sacrifice contributions, and you are not entitled to claim a tax deduction for your personal superannuation contributions);
• Have an assessable income (and reportable fringe benefits) of less than $60,342 in the 2009/10 financial year;
• At least 10% of your income must be earned as an employee (or, if you are self-employed, you must earn at least 10% of your income from carrying on a business);
• You lodge an income tax return for the year of income;
• Be less than age 71 at the end of the financial year in which you make the contribution;
• Not be a temporary resident.

Examples*

Example 1

Assuming the government continues to offer the co-contribution in future years, a person earning less than $30,342 per annum who is eligible for the full co-contribution and can afford to contribute $1,000 per annum from their after tax income could expect to receive $77,651 after 20 years.

Out of pocket expenses over the twenty years = $20,000
Government Co Contribution over the twenty years = $20,000
Superannuation amount after 20 years = $77,651

A return of $77,651 for a $20,000 investment!

Example 2

Person earning $42,342 per annum who is eligible for part co-contribution and can afford to contribute $1,000 per annum from their after tax income could expect to receive $62,120 after 20 years:

Out of pocket expenses over the twenty years = $20,000
Government Co-Contribution over the twenty years = $12,000
Super amount after 20 years = $62,120

A return of $62,120 for a $20,000 investment!

* The above examples assume ongoing availability of the Government Co-contribution and ongoing returns of 6.5% per annum.

DISCLAIMER
The content of this article contains general securities advice only, which is not intended for any particular client. In preparing the content, Ethical Investment Services Pty Ltd has not taken into account any particular customer's investment objectives, financial situation or particular needs. Accordingly, before acting on any advice contained in the content, you should contact your financial adviser to consider whether the advice is appropriate in light of your particular investment needs and circumstances.