As we navigate through the golden years, it’s crucial to ensure that our nest egg is as robust as possible to enjoy a comfortable retirement. For many Australian seniors, superannuation is the key to unlocking a worry-free retirement, and the government is offering a helping hand that could boost your super by up to $1,500, at absolutely no cost to you.
This initiative is part of the government’s incentive program aimed at helping lower-income earners save for retirement by topping up their superannuation funds. If you’re an Aussie earning less than $45,400 in the 2024-25 financial year ($43,445 for 2023-24), you could be eligible for this superannuation cash boost.
Here’s how it works: for every dollar of eligible personal contributions you make to your superannuation fund, the government will contribute 50 cents, up to a maximum of $500 per annum. This is known as the government super co-contribution. The beauty of this scheme is that it’s designed to phase down for individuals with total incomes between the lower threshold ($45,400 for 2024-25) and the higher threshold ($60,400 for 2024-25). The co-contribution tapers off at a rate of 3.333 cents for each dollar you earn over the lower threshold, ceasing once you hit the upper threshold.
It’s important to note that these contributions are non-concessional, meaning they’re made from after-tax income and don’t include contributions that attract an income tax deduction. Also, certain exclusions apply, such as transfers from foreign super funds and rollovers.
To be eligible for the government super co-contribution, there are several criteria you must meet:
- Your total income must be below $60,400 for the 2024-25 financial year ($58,445 for 2023-24). This includes your assessable income, Reportable Fringe Benefits, and Reportable Employer Superannuation Contributions, minus any eligible deductions (if any) related to carrying on a business.
- You must be under the age of 71 at the end of the tax year.
- An income tax return for that financial year must be lodged.
- You must not have held a temporary resident visa at any time during the financial year.
- At least 10% of your total income must come from running a business, being self-employed, from eligible employment, or a combination of these.
- Your total superannuation balance as of June 30 the previous financial year must be below the transfer balance cap ($1,900,000).
- Your non-concessional contributions must not exceed the non-concessional contributions cap for the year ($120,000).
To receive a super co-contribution, ensure your total income for the 2024-25 year is less than $60,400. Then, make a non-concessional (after-tax) contribution to your superannuation fund by 30 June 2025. After making your contribution, lodge your tax return, and within 60 days, the government will deposit the co-contribution into your super fund. It’s important to note that your superannuation fund cannot accept after-tax contributions or receive the co-contribution on your behalf unless you’ve provided your Tax File Number (TFN) to the fund.
The amount you’re entitled to depends on your total income. For instance, if your income is $45,400 or less, and you make a $1,000 contribution, you’ll receive the full $500 co-contribution. As your income increases, the benefit decreases, phasing out completely at an income of $60,400.
But that’s not all. There’s also the low-income superannuation tax offset. If you earn up to $37,000, you’ll receive a refund into your super account equivalent to the tax paid on your concessional super contributions (like the super paid by your employer), capped at $500. This ensures that most low-income earners will not pay tax on their super contributions. Without the offset, low-income earners would be disadvantaged by the super system, as they are taxed at 15 per cent on super contributions—potentially higher than their actual marginal tax rate. There’s no action required on your part to claim the offset. The ATO will assess your eligibility and automatically apply the offset for you.
If your spouse earns a low income or doesn’t work, you may be eligible for a tax offset by contributing to their complying superannuation fund. You can claim an 18% tax offset, up to a maximum of $540 per year. To qualify, your spouse’s assessable income, reportable fringe benefits, and reportable superannuation contributions must total less than $37,000. The offset gradually decreases as their income rises and is completely phased out once their income exceeds $40,000.
Have you used the government’s super co-contribution scheme or benefited from the low-income superannuation tax offset? We’d love to hear your experiences in the comments below—your insights could help others make the most of these opportunities for a secure retirement.
Also read: The future of superannuation: A bold proposal for tax reform
