SCC Chartered Accountants

   

Don’t forget the Govt. Co-contribution

A personal contribution to superannuation before 30 June will qualify you to receive the Government Co-contribution.

The Government superannuation co-contribution started back in 2003, this is where the government will match personal superannuation contributions made by people who qualify.  In fact, they will more than just match the personal contribution made, in some cases they will pay up to 50% more than the contribution made a person.

To be eligible, individuals (including those who are self-employed) must satisfy certain criteria, these include:

• Being eligible to make a superannuation contribution (including being less than 71 years old),Must actually make a personal (‘non-concessional’) contribution to superannuation,
• Lodge a tax return for the year in which the personal contribution was made,
• Earning 10% or more from carrying on a business, employment or a combination of both; and
• Their total income is less than $58,980 for the financial year.

Assessable income plus reportable fringe benefits	$500 Contribution	$1,000 Contribution	Personal contribution required to receive maximum Co‑ contribution
$28,980 or less	$750	$1,500	$1,000
$30,980	$750	$1,400	$933
$32,980	$750	$1,300	$867
$34,980	$750	$1,200	$800
$36,980	$750	$1,100	$733
$38,980	$750	$1,000	$667
$40,980	$750	$900	$600
$42,980	$750	$800	$533
$44,980	$700	$700	$467
$46,980	$600	$600	$400
$48,980	$500	$500	$333
$50,980	$400	$400	$267
$52,980	$300	$300	$200
$54,980	$200	$200	$133
$56,980	$100	$100	$67
$58,980	$0	$0	$0

Example – Co-contribution for someone who is self-employed

Michelle, a self-employed graphic designer, has gross business receipts of $43,000, business deductions of $41,500, and other personal investment income of $15,000. Michelle would be eligible for a co-contribution because her percentage of gross income from employment or carrying on a business would be 74% ($43,000/($43,000 + $1 5,000)) and her net income for threshold purposes would be $16,500 ($43,000 + $15,000 – $41,500).

Eligible self-employed persons seeking a co-contribution would need to consider the component of their contribution for which they intend to claim a deduction and the component they wish to remain non-concessional (undeducted) for co-contribution purposes.

Michelle makes a personal superannuation contribution of $5,000 to a complying fund on 30 June 2008 and claims a $4,000 deduction in her 2007-08 tax return. The ATO receives contribution data from Michelle’s fund that the fund received personal contributions of $5,000. From the fund data and the income tax return, the ATO determines that $1,000 of the personal contribution is not deductible and that a co-contribution of $1,500 is payable into Michelle’s account.

Example – Co-contribution for someone who is an employee

Jack who is age 45 and works full time contributes $500 into superannuation as an personal non­-concessional contribution. His total income for the financial year is $40,980.

As Joe earns $40,980, his co-contribution entitlement is reduced by 5 cents for every dollar over $28,980.

$1,500 – (($40,980 – $28,980) x 0.05) = $900

However, as he has only made $500 in personal contributions for the year, the government co-contribution will be limited to $750 (ie. $500 x 1.5). Had Jack contributed $600 in personal undeducted contributions, he would have received his maximum entitlement of a co-contribution of $900.