If you’re anything like me, your whole will to live is currently closely tied to the idea of getting a juicy, phat tax return in a couple of weeks. Shitty cold weather? Just think of your tax return! Dealing with awful landlords? Imagine your tax return! Just went on a drunken spending rampage? Don’t worry, your tax return is coming!
Given that financial Christmas is right on our doorstep, it’s only natural to start looking at more ~creative~ ways to make your tax return a little juicier (after all, there’s only so much stationery we can buy before it seems kinda suss).
Today’s edition is exactly that — a clever, underused government scheme that’ll pretty much give you free money into your superannuation. It’s called the ‘super co-contribution’, and if you’re eligible, you’ll be gifted with an extra $500 into your superannuation account, just because.
While you might not reap the benefits for it now, it’s pretty tempting given the power of compound interest, which could easily transform your $500 into thousands of dollarydoos.
Here’s the DL on the super co-contribution scheme.
What is the super co-contribution?
The super co-contribution scheme is designed to help low or middle-income earners boost their retirement savings, so if you’re a richy-rich — in the government’s eyes, someone who earns over $57,000 (LOL) — then look away now.
Cool, we’re all struggling here? Excellent.
Basically, the super co-contribution scheme means that if you make a voluntary (after-tax) contribution to your superfund, the government will also make a contribution into your super account up to the amount of $500.
Sick.
The amount of money you’ll receive is relative to a couple of factors, including your income and how much money you contribute to your super.
“The co-contribution is essentially free money from the government for low-income earners,” financial adviser Richard Gough told the ABC.
But there are a number of eligibility requirements you’ll need to meet before you get your mitts on that tasty cash. You’ll need to meet an income test, be less than 71 years old, and be lodging a tax return this year.
For this financial year, you need to earn less than $42,016 to be eligible to claim the full $500 entitlement.
How much money will I get?
This all depends on how much you earn and how much you contribute. The matching rate is set at 50 per cent, which is a fancy way of saying that the government will pay half of whatever you contribute.
That means that if you earn under $42,016 this year, you’ll need to voluntarily contribute $1,000 to your super in order to receive the maximum $500 co-contribution from the old mate Albo.
If you earn over that $42,016 threshold, the entitlement will progressively reduce as you earn more. But if you earn more than $57,016, you won’t be entitled to anything, unfortunately. Sad.
As a quick example, if you earn $50,000, you’d be eligible for a co-contribution payment of $234. That means that in order to claim the full amount, you’d have to deposit $468 into your super after tax.
If you earn under $42,016, in order to reap the full $500 benefit, you’d have to contribute $1,000 to your super. Don’t have a grand laying around? That’s cool. You can just contribute as much as you’re able to and you’ll likely receive 50% of whatever amount you contribute.
To see what you’re eligible for, the ATO has whipped up a cute little calculator where you can plug in your income and see how much moolah you’re entitled to.
How will I receive the money?
The contribution will be automatically paid into the account you make your contribution into after your tax return is processed.
These payments are usually paid between November and January, but let’s be real — no one is actually checking their super account that much.
So, should I actually do the super co-contribution scheme or keep the money in my bank account?
Good question. Obviously, it depends on your own financial situation and we can’t give any personal advice (the lawyers made us say that).
If you’ve got an extra $1,000 hanging around in your savings account that you won’t need in the future, the scheme could be a great way for you to boost your retirement savings (especially thanks to the power of compound interest!).
“Money you invest in your super fund then compounds over time, so the younger you are the more you have to benefit from super in general and this scheme,” Gough told the ABC.
But if you have more immediate goals like buying a house (lol) or y’know, just trying to deal with an impending cost of living crisis, Gough says you might not have spare money that can be locked away for eternity (or until you retire), so the scheme might not be right for you.
“If you have more immediate financial goals — such as buying a house, paying off the mortgage, school fees, holidays, cost of living etc — you might not have spare money that can be locked away for decades potentially,” Gough told the ABC.
This is general information only. You should always obtain your own independent advice before making any financial decisions.
