The Australian Government’s new superannuation co-contribution can help lower income Australians boost their savings, in preparation for retirement.

What’s the new Super contribution worth to you?

Under the incentive, for every dollar you contribute to your own Superannuation, the Government will match it with a co-contribution of $0.50.

So, say you deposit $1,000 into your super as a personal (after-tax) contribution, and you could receive a co-contribution of up to $500 in a financial year. To qualify for the $500, your total income must be under $35,454 for the 2015/16 financial year.

The super co-contribution amount reduces as you earn more income. For every dollar of income you earn above $35,454, the $500 reduces by 3.333 cents.  Once your income reaches more than $50,454, no co-contribution is payable to you.

For example, if Jane had total income of $40,000 per annum, the maximum co-contribution she could receive would be around $348, if she contributed $500 of her own money.

That is:

$500 minus ($40,000 – $35,454) x 3.333 cents = $348.48

To get this maximum amount of $348, Jane would need to deposit $697 into his super as an after-tax contribution.

If maths isn’t your cup of tea, you can use a handy calculator designed by the good people at MoneySmart to estimate your co-contribution.

Other things to keep in mind

There are a few other things you need to keep in mind with the new super co-contribution:

– The contribution needs to be a personal, non-concessional contribution. Put simply, that means you need to use after-tax money, for instance, money you have in a personal bank account.

– Your total income includes your assessable income plus reportable fringe benefits and any salary sacrifice contributions to super. So if your income is too high, you can’t simply salary sacrifice to reduce your income down to the required level to receive the co-contribution.

– You need to be working to qualify. Specifically, 10% or more of your total income needs to come from employment or conducting a business (or a combination of both).

– Oddly, you need to be less than 71 years of age at the end of the financial year, to be eligible. Not sure why the government discriminates here against the more mature folk amongst us!

– You must lodge your tax return to receive your co-contribution.

 

For further information on the measures detailed above, please don’t hesitate to contact Acorn Financial Services on (08) 8367 0330.

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This blog post was first seen on: www.thesmartmoney.com.au