Growing your super: Government super contributions

One of the risks retirees can face is the potential to run out of retirement savings by living longer than expected—commonly referred to as longevity risk.           

For many of us, super will form an integral part of our retirement savings. However, our ability to grow our super to a sufficient level during our working years can, at times, be challenging.

For example, for those of us who work casual or part-time, take time out of work, or have ‘lumpy’ income, this can mean periods where no super contributions are made, or contributions are limited.

In these situations, there can be flow-on effects regarding our super balance—time, contributions, returns, and fees can impact our super balance come retirement.

Given this, there are several Government super contribution measures to assist those eligible to grow their super for retirement. Below is an overview of these Government super contribution measures, namely:

1. the Government co-contribution
2. the low-income super tax offset.

Government super contributions

Co-contribution (1 July 2021 to 30 June 2022)

The Government’s co-contribution is available to certain individuals who make non-concessional contributions.

An individual can be eligible for the co-contribution if they:

• make a personal non-concessional contribution to a complying super fund in the financial year
• don’t exceed their non-concessional contributions cap in the relevant financial year
• have a total super balance of less than $1.7 million as at 30 June of the prior financial year
• are less than 71 at the end of the financial year in which the contribution is made
• have a total income* for the financial year of less than $56,112
• have at least 10% of their total income coming from either eligible employment-related activities, carrying on a business, or a combination of both
• have lodged a tax return for the financial year
• don’t hold a temporary visa at any time during the financial year (unless they are a New Zealand citizen or it was a prescribed visa)
• have supplied their Tax File Number to the complying super fund.

*The total of an individual’s assessable income, reportable fringe benefits total, and total reportable super contributions reduced (but not below zero) by any excess concessional contributions, minus assessable FHSSS released amount and allowable business deductions.

The Government pays a co-contribution to an individual’s super account^ at a rate of 50% of the eligible contributions the individual made—with the maximum co-contribution being $500.

^The co-contribution can be paid directly to an individual in certain circumstances, for example, if they are retired (either by reaching preservation age or due to permanent incapacity or invalidity) and no longer have an eligible super account.

The lower and higher income thresholds for the co-contribution are $41,112 and $56,112, respectively. The maximum co-contribution of $500 reduces by 3.333 cents for each $1 of income earned over $41,112 and cuts out when an individual’s income reaches $56,112.

According to the latest ATO statistics*, from 1 July 2019 to 30 June 2020, the total number of co-contribution beneficiaries was 393,154. And, the total amount of co-contributions made was $122,646,000.

Low-income super tax offset (1 July 2021 to 30 June 2022)

Employees or self-employed individuals with low income may also be eligible for the Government’s low-income super tax offset—available to certain individuals who make or receive concessional contributions.

An individual can be eligible for the low-income super tax offset if they:

• make or receive (from their employer) a concessional contribution to a complying super fund in the financial year
• have adjusted taxable income* for the financial year of $37,000 or less
• have lodged a tax return, and at least 10% or more of their total income comes from business and/or employment, or they haven’t lodged a tax return, and at least 10% of their total income comes from their employment
• haven’t held a temporary visa at any time during the financial year (unless they are a New Zealand citizen in Australia)
• have supplied their Tax File Number to the complying super fund.

*The total of an individual’s total income (disregarding any assessable FHSSS released amount), adjusted fringe benefits total, total net investment loss, and reportable super contributions, minus any child support paid.

The Government pays the low-income super tax offset to an individual’s super account^ at a rate of 15% of the eligible contributions—with the maximum offset being $500, and the minimum being $10.

^The low-income super tax offset can be paid directly to an individual in certain circumstances, for example, if they have reached their preservation age and have retired.

According to the latest ATO statistics^, from 1 July 2019 to 30 June 2020, the total number to benefit from the low-income super tax offset entitlement was 2,806,726. And, the total amount of low-income super tax offset paid was $711,830,000.

*Australian Government, ATO. (2020). Annual reports – Super co-contributions: 1 July 2019 to 30 June 2020.

^Australian Government, ATO. (2020). Annual reports – Low income superannuation tax offset: 1 July 2019 to 30 June 2020.

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