Technical Information
- Why not let the government give your superannuation a helping hand?
- Are you eligible for the superannuation co-contribution?
- Employment for Super Co-contribution purposes.
- What are personal contributions?
- How long do my contributions need to be preserved?
- Need more information?
- Proposed Legislation Changes effective from 1 July 2007
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Why not let the government give your superannuation a helping hand?
For eligible individuals, the Government will make a co-contribution of up to $1,500, to match a $1,000 personal contribution. ($1.50 for every $1 of personal contribution up to the co-contribution maximum)
The income threshold to which the maximum co-contribution applies is $28,000. For total incomes above $28,000, the maximum co-contribution will reduce by 5 cents for each dollar of income and phase out completely at an income of $58,000.
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Are you eligible for the superannuation co-contribution?
To be eligible for the Super Co-contribution you need to meet certain requirements. Broadly, you need to:
- have made or make personal contributions to your super;
- earn less than $58,000 a year before tax (total income, not household income);
- be employed full-time, part-time or on a casual basis;
- receive or be entitled to receive superannuation contributions from your employer (Note: the Government is proposing that the law be amended to change this requirement, making more people eligible);
- be under 71 years of age and
- lodge an income tax return for the income year;
- be a permanent resident of Australia.
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Employment for Super Co-contribution purposes.
Most employees can claim the Super Co-contribution if they meet all of the other eligibility requirements and they receive or are entitled to receive employer superannuation support.
However, you will not be eligible for the Super Co-contribution if you are eligible to claim a tax deduction for superannuation contributions (regardless of whether or not you claim the deduction). For example, if you are a self-employed person you are considered eligible to claim a tax deduction and so you would not be eligible for the super co-contribution.
To be entitled to the Super Co-contribution you must be less than 71 years of age at the end of the financial year in which you make the personal contribution.
Budget 2006 proposals – From 1 July 2007, the 10% of taxable income rule will include self employment income so that self employed people, and people that are both self-employed and employed by an employer can be eligible for the government co-contribution. Unemployed people, or those that do not have at least 10% of income from either/both self employment, and eligible employment, will continue to be ineligible for the government co-contribution.
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What are personal contributions?
Personal contributions are the amounts you choose to contribute to the T.I.S. Fund from your after tax income. This is in addition to the contributions made by your employer and any contributions made through any salary sacrifice arrangement.
The following superannuation contributions do not attract the Super Co-contribution:
- contributions made by your spouse, employer or any other party on your behalf
- salary sacrifice contributions (these are considered to be employer contributions)
- deductible contributions, where you are eligible to claim a tax deduction, irrespective of whether a deduction is claimed.
The Super Co-contribution:
- cannot be used to reduce a separate tax debt
- must be preserved in the fund (it can only be accessed when other preserved amounts can be accessed)
- is not included in your tax return
- will not be subject to any taxation when initially paid to the fund
- will not be taxed as an end benefit, and
- will not count towards your reasonable benefit limit (RBL).
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How long do my contributions need to be preserved?
The preservation rules mean that the Super Co-contribution will be treated as a preserved benefit. Generally, preserved benefits must be retained in a superannuation fund or retirement savings account (RSA) until the member has met a condition of release. A condition of release is satisfied when a member has reached at least age 55 and retired from all employment prior to age 65. At age 65 there is no restriction on the payment of the benefit. If a member has not attained their preservation age and permanently retired, the benefit can be paid where it is as a result of the member’s death, disablement, severe financial hardship or because of compassionate reasons. You will also need to satisfy any conditions of release in the superannuation fund rules. Contact The T.I.S. Fund to determine if you have already met a condition of release.
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Need more information?
The above has been taken from the A.T.O. Website www.ato.gov.au. There is much more information on this site or alternatively phone their information line on 13 10 20, or write to the Australian Taxation Office, Superannuation Business Line P.O. Box 277 WTC VIC 8005.
Next financial year could even be better.
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Proposed Legislation Changes effective from 1 July 2007
Age based limits – $50,000 annual limit (indexed) on taxable contributions across all ages. This will be a flat limit per person and will cover the total of all taxable contributions, both employer and personal deductible, made for or by a person. Taxable contributions for a person which exceed this annual limit will be taxed at the highest marginal tax rate plus Medicare Levy.
A transitional period will apply to contributions paid for persons over age 50, or those reaching age 50 before 2012/2013 financial year. These members can receive to $100,000 in taxable contributions from 1 July 2007, until 2011/2012.
Reasonable Benefit Limits – From 1 July 2007, Reasonable Benefit Limits on retirement receipts will be removed.
Tax on Benefits , Lump Sums – From 1 July 2007, the Pre 1/7/83 and concessional components will become tax-exempt and the excessive component will be abolished. It is also proposed that from 1 July 2007 any payment from a taxed super fund at age 60 or over will be tax-free.
Compulsory Payment of Benefits – From 10 May 2006 the compulsory cashing rules for members aged 60 and over will be abolished.
Tax File Numbers – Under proposed legislation changes, if your Superannuation Fund does not have your Tax File Number there will be a tax of 45% on employer SG Contributions and the Fund will be unable to accept undeducted member.
