Super co-contribution eligibility under 67 and over 67
Firstly, what is the super co-contribution?
Super co-contributions help eligible people boost their retirement savings. If you’re a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution (called a co-contribution) up to a maximum amount of $500.
The amount of government co-contribution you receive depends on your income and how much you contribute.
You don’t need to apply for the super co-contribution. When you lodge your tax return, the ATO will work out if you’re eligible. If the super fund has your tax file number (TFN) the ATO will pay it to your super account automatically.
The way your co-contribution is calculated depends on the financial year in which you made your personal super contributions.
What is the contribution amount by the government?
While the government payment is an amount up to $500 a year, it is tax-free and when you add the $1,000 of after-tax personal super contributions you need to make to qualify for this government payment, the annual extra $1,500 could give your super a boost. (Check eligibility here)
As far as entitlements to the co-contributor are concerned, if you earn less than $56,112 in the 2021-22 financial year and especially less than $41,000 from a job or your business, you should be entitled to a co-contribution of up to $500. That’s if you are also willing and can afford to contribute $1,000 to your super from after-tax savings at the same time.
The significance of super co-contribution continuation after age 67
The significance of age 67 is that from 30 June 2020, anyone under that age who wishes to make a contribution to super can do so without having to satisfy a gainfully employed work test, a concession that was previously only available to those under 65.
To satisfy the work test, you must work at least 40 hours during a consecutive 30 day period each income year in order for your fund to accept a personal super contribution for which you can claim a deduction.
If you wish to make a super contribution using the age 67 concession without having to satisfy a gainful employment work test, you must make the contribution before you are 67.
If you were to make this after you turned 67, you would have to work 40 hours within a 30-day consecutive period in order for a super fund to determine that the contribution is eligible.
What is interesting about the work required is that it is not related to the amount of income you earn from working.
That said, to qualify for the co-contribution of up to $500 (if you are under 67), you will still need to show that you have earned income from work, which must be from gainful employment
So it is not possible for someone who is under 67 who has no income from working to satisfy the co-contribution rules.
Being gainfully employed means you must be engaged in paid work regardless of how many hours you work. You could also be gainfully self-employed in your own business. But you will need to lodge a tax return if you want the co-contribution.
Also, under the co-contribution rules, you will need to earn at least 10% of your tax assessable income from employment or business activities (more on this below).
This 10% of eligible income is to determine if non-concessional contributions that you have made entitle you to receive the government co-contributions subject to the income limits and the amount of contributions.
A tax return is an essential part of the co-contribution rules because the ATO calculates entitlements to the co-contribution using information contained in this.
Income threshold test
To receive the co-contribution, your total income must be less than the higher income threshold for that financial year.
Your total income
For the purpose of this test your total income for the financial year is:
• the total of your
- assessable income
- reportable fringe benefits total (RFBT)
- total reportable super contributions reduced (but not below zero) by any excess concessional contributions
• minus your
- assessable first home super saver released amount
- allowable business deductions.
If you are carrying on a business, you may have a high turnover but still be eligible for the super co-contribution due to your allowable business deductions.
If your total income is equal to or less than the lower threshold and you make personal contributions of $1,000 to your super account, you will receive the maximum co-contribution of $500.
You will not receive any co-contribution if your income is equal to or greater than the higher threshold.
If your total income is between the two thresholds, your maximum entitlement will reduce progressively as your income rises. If your co-contribution is less than $20, we will pay the minimum amount of $20.
10% eligible income test
To satisfy this test, 10% or more of your total income must come from either:
- employment-related activities
- carrying on a business
- a combination of both
Amounts from these sources are referred to as eligible income amounts.
For this test, your total income is not reduced by your allowable business deductions. This is to ensure self-employed individuals are not disadvantaged if they have low income or low profit margins in a financial year.
Examples of eligible income
Working out the exact total income and eligible income may be complex, depending on your circumstances. You may need to seek professional advice to assist you.
Generally, 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 payments and lump sum payments
Calculating your super co-contribution
The minimum co-contribution payment is $20. Payment amounts are rounded up to the nearest multiple of five cents.
The way your co-contribution is calculated depends on which financial year you made your personal super contributions.
You can use our super co-contribution calculator to estimate your co-contribution entitlement and eligibility.
In the current financial year, Angelo will earn $35,000. He pays $40 per fortnight from his take-home pay into his super account. This will total $1,040 for the financial year. He meets all other co-contribution eligibility requirements.
With this payment plan, Angelo will be eligible for the maximum co-contribution of $500.
We will pay this amount into Angelo’s super account.