Government Superannuation Co-Contribution
Money for nothing!
50% guaranteed return on investment, if you meet the following criteria:
- Your total income is equal to or less than the lower threshold of $37,697 for the 2018/2019 financial year;
- 10% of your eligible income must come from employment-related activities, carrying on a business, or a combination of both;
- You were less than 71 years old at the end of the financial year;
- You lodge a tax return; and
- You make personal contributions of $1,000 to your super account.
Then you will receive the maximum co-contribution from the Government of $500 – guaranteed!
So, invest or contribute $1,000 and get $500 that’s a 50% guaranteed return!
If your eligible income is above the lower threshold of $37,697 but below the upper threshold of $52,697 for the 2018/2019 financial year, and you satisfy the above criteria, you will be eligible to a reduced Government Co-Contribution.
This is a great strategy to consider for your kids also (provided they meet the above criteria).
The compounding benefits of making additional contributions early in life definitely pay off when retirement approaches.
Spouse Contributions
Commencing 1 July 2017, the Government has increased access to the low-income spouse tax offset.
This provides up to $540 per annum as a tax offset (or rebate) for the contributing spouse and will apply where the low-income spouse’s assessable income is below $40,000 (increased from the current $10,800).
So, if the higher income earner contributed $3,000 into their spouse’s superannuation fund they receive a $540 tax offset or credit on their annual tax return.
This is a great strategy for couples where one spouse is earning a higher income and can contribute for their spouse to reduce personal taxation, whilst also increasing retirement funds.
Tax Deductions for Personal Superannuation Contributions
From 1 July 2017, individuals eligible to make contributions to superannuation, will be able to claim an income tax deduction for personal superannuation contributions up to the concessional contribution cap of $25,000.
Note the $25,000 cap also includes your employer compulsory contributions! See example below:
- Salary $60,000
- Employer superannuation contribution at 9.5% = $5,700
- Amount available to contribute under the contribution cap = $19,300 ($25,000 -$5,700)
This strategy could be utilised at the end of each financial year to make a lump sum superannuation contribution from your personal funds if you find yourself under the concessional contribution cap for the year.
This is effectively the same as salary sacrificing each pay cycle through your employer.
This strategy could also be beneficial if a large capital gain is made during a single financial year to reduce your overall tax liability.
This will apply regardless of employment status.
Important Note: You will need to complete the notice of intent to claim a tax deduction form and return it to your superannuation fund. You will then receive acknowledgement from your superannuation fund and this notice is required when you complete your 2019 tax return. If you don’t have the correct paperwork you will not be able to claim the deduction!
As always it is important to ensure your actions are appropriate for your circumstances. Please contact us if you require advice.
Superannuation Contribution Caps
There are limits to the amount you can contribute into superannuation per year. These caps are for the 2018/2019 financial year are as follows:
- Non-Concessional Contribution Cap $100,000
- Concessional Contribution Cap $25,000
Non-concessional contributions are after-tax contributions including spouse contributions and contributions made under the Super Co-Contribution Scheme. Non-concessional contributions were previously known as undeducted contributions.
Concessional contributions are before-tax contributions and include your employer’s compulsory contributions, additional employer contributions, and any amounts that you salary sacrifice into superannuation or personally claim a tax deduction for.
For persons under age 65, there is the ability to contribute three times the non-concessional contribution cap limit in a single year, provided that you do not make further non-concessional contributions in the following two financial years and have a superannuation balance of less than $1.4 million.
There are penalties if you exceed the superannuation contribution caps. Please contact our financial planning team if you require advice.
Important Notes
Contributions need to be made correctly with the appropriate paperwork completed. This varies from fund to fund and what type of contribution you are making.
Contributions must be received and cleared in your superannuation account by 30 June 2019.
30 June falls on a Sunday this year so make sure payments are cleared in the superannuation bank account by Friday 28th June 2019.
If you are interested in discussing any of the above strategies or your retirement planning in general, please contact our Financial Planning Team.