- Superannuation is the system that funds people to retire in Australia.
- To help boost your super balance, the government offers a co-contribution scheme.
- When it comes to super, incremental contributions you make now will have an exponential payoff later.
When is the last time you looked at your retirement fund?
In Australia, we retire with superannuation or super for short. Super’s objective is to lift the living standards of Australians in retirement. Of course, it’s not a perfect system, and there are things we hate about super, but it’s the retirement system we have and what we must plan to work within.
We want you to have a healthy super balance to retire on.
That’s why we want more people to know about the super co-contribution scheme. This Australian Government scheme aims to help eligible people boost their retirement savings. The actions you take to sort out your super now will add up to benefit future you.
Here’s how to get an extra $500 in your super account this year:
1. You need to make a personal super contribution
Personal super contributions are money you contribute from your take-home pay that has already been taxed. That is money on top of the money your employer puts into super on your behalf. You can also make contributions before tax, but these personal contributions made as a tax deduction are not currently entitled to super co-contributions.
2. You can make small payments during the year
Many of us see the co-contribution payment we need to make as a large lump sum payment, which seems out of our reach. However, you can also make smaller payments during the year. The ATO uses the total amount you contribute during the year to calculate the co-contribution. Your super fund should be able to help you with the process if you get stuck.
3. Check the income and super caps
To receive the maximum co-contribution of $500, you need to make a personal contribution of $1,000 to your super account and ensure you meet the income and super eligibility caps. This includes what you earn and the amount you’ve contributed to your super. You should also check the super contributions cap so that you don’t end up paying extra tax.
4. Co-contribution payments will vary
The co-contribution depends on your income and the personal contributions you put in your super fund. For example, under the current rules at the time of writing, if you earned $35,000 and wanted to contribute $20 a week of your after-tax pay into your super, you’d end up contributing $1040 per year. If you meet all eligibility requirements, you’d qualify for the maximum co-contribution and gain an extra $500 in your super account.
5. You must check the Australian Tax Office website for updates
The super co-contribution scheme is managed by the Australian Tax Office (ATO), and they make the rules on how it works. While we’re looking at this information as it appears at the time of writing, these rules can change over time. That’s why it’s really important to check the ATO website for the latest updates when making these decisions.
6. You can calculate an estimate co-contribution
If you’re having difficulty working out how much of a co-contribution, you can use the ATO’s super co-contribution calculator. This will help you estimate the co-contribution you might receive to plan ahead.
When it comes to super, incremental contributions you make now will have an exponential payoff later.
What you do now matters. If you’re not earning as much money at this stage of your life, you can choose to use the co-contribution scheme to increase your super balance. Your future self will thank you for it.