Superannuation Co-Contribution

Dated: May 2004

You can now receive up to $1,000 from the government in 2004

If you earn less than $40,000 pa and make a personal contribution to superannuation, the government will also make a payment under their Super Co-Contribution Scheme.

If you earn less than $27,500 pa the government will match any personal contribution (up to $1,000) on a dollar for dollar basis. If you earn between $27,500 and $40,000 the Super Co-Contribution will be adjusted based on your income and how much you personally contributed. Contact us for further information on your entitlement.

To be entitled to a government co-contribution you must:

• Have received employer super support (SGC) during the year;
• Be employed full-time; part-time or on a casual basis. You are not eligible if you are wholly or substantially self-employed;
• Make a personal contribution to a superannuation fund this financial year;
• Lodge a tax return this year;
• Be a low income earner (eg have assessable income and reportable fringe benefits of less than $40,000); and
• Be less than 71 years old;

Anyone that meets the above criteria should seriously consider taking advantage of this scheme. With the government matching your personal contributions you can receive up to a 100% return on your investment.

The above scheme is very good, but not everybody has a surplus $1,000. Glenn Setches and Lis Keilty of OzPlan Financial Services have some strategies that could be looked at to take advantage of this scheme:

• Redraw from your housing loan. A 7% interest expense on $1,000 is only $70 pa, compared to $1,000 received from the government.
• Withdraw non-preserved super funds and re-invest as personal contributions.
• Withdraw from other investments. Which investment will give you a better return?
• Reduce salary sacrifice arrangements of a higher income earner.

These are a few strategies that can be looked at to take advantage of this free $1,000 from the government. There are also other strategies that can be used, so if you wish to discuss this scheme further give Glenn or Lis a call.

Also don’t forget about your children or grandchildren. If they meet the above working criteria they can also participate in this scheme. This would be a good starting point to build wealth for their future.

In certain circumstances it will also be possible to not only receive the $1,000 co-contribution but also the $450 spouse tax rebate for low income earning spouses.

The superannuation co-contribution has been upgraded to $1,500 in 2005 with threshold changes. This can be viewed on the News & Articles page of this Patison Partners website under the Superannuation section.