Getting money into super
2.9 Government Co-contribution
The government co-contribution is designed to help eligible members boost their super savings.
To receive the Government co-contribution to superannuation, a member's total income* must be less than the higher income threshold for the current financial year. The maximum co-contribution entitlement is $500.
|Income thresholds for eligibility|
|Year||Maximum co-contribution entitlement||Lower income threshold||Higher-income threshold|
Members with total income* less than the higher-income threshold in the relevant financial year, who make a personal non-concessional contribution to superannuation, may be eligible for a government co-contribution.
|Amount of co-contribution payable - 2021-22|
|Total income*||$0 - $41,112|
|Lesser of:||eligible contributions x 50%, and $500|
|Total income*||$41,112 - $56,112|
|Lesser of:||eligible contributions x 50%, and $500 reduced by $0.03333 for each dollar over the lower income threshold|
To qualify for the government co-contribution a member must meet the eligibility criteria.
To be eligible to receive a government co-contribution, members must satisfy the following requirements for the relevant financial year:
- be less than 71 years old at the end of the financial year
- be eligible to contribute to superannuation and make a personal non-concessional (after-tax) contribution to a complying superannuation fund by 30 June
- satisfy the two income tests (income threshold and 10% eligible income tests)
- lodge a tax return for the relevant financial year
- not hold a temporary visa at any time during the financial year (unless they are a New Zealand citizen, or it was a prescribed visa)
- total superannuation balance is less than the transfer balance cap ($1.7 million from the 2021/22 financial year) at the end of 30 June of the previous financial year.
- not contributed more than their non-concessional contributions cap
Note: The superannuation fund must have the member's tax file number, as the ATO will pay the government co-contribution to the superannuation fund account automatically.
10% eligible income test
To satisfy this test, 10% or more of a member's total income must come from:
- employment-related activities
- carrying on a business
- a combination of both
These amounts are referred to as 'eligible income' amounts.
To determine eligibility for the co-contribution under the 10% rule for a sole trader, total income is not reduced by business deductions.
Income that is related to employment or business is eligible income - for example:
- salary and wages
- business income earned as a sole trader or in a partnership
- director fees.
The following types of income are not eligible income for super co-contribution purposes:
- non-business partnership distributions
- distributions from a trust
- income from individually or jointly held assets, such as interest, rent and dividends
- income related to another year of employment, such as employment termination payment and lump sum payments.
Contributions not eligible for a co-contribution
- child contributions
- spouse contributions
- transfer from an overseas fund
Claiming a tax deduction for personal contributions
Eligible members 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 for co-contribution.
For the member to receive the co-contribution, their total income must be less than the higher income threshold for that financial year.
Total income is the sum of:
- assessable income
- reportable fringe benefits
- reportable super contributions reduced (but not below zero) by any excess concessional contributions, less
- members assessable first home super saver released amount, and allowable business deductions
Assessable income - is the income that is included in the member's tax return. Assessable income is not reduced by tax deductions (taxable income is after-tax deductions).
Reportable fringe benefits - Certain fringe benefits (non-cash benefits) paid by an employer are required to be reported in the employee's tax return. These are known as reportable fringe benefits.
Reportable employer superannuation contributions - reportable employer superannuation contributions are contributions made to a superannuation fund by an employer for an individual. An example is a contribution made on your behalf under a salary sacrifice arrangement.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Tuesday, August 24, 2021