Do you qualify for the Government’s tax free payment?

Do you qualify for the Government’s tax free payment?

13 Feb, 2023 By: Lotus Smart

The Federal Government is giving away money to anyone who makes an after-tax contribution to their super fund, and who earns less than $49,488 a year (for the 2014/2015 year). This is called co-contribution. To be eligible for the super co-contribution, your personal contributions need to be paid to a complying super fund. You will be entitled to the tax-free contribution from the Government only if you satisfy a work test and age test apart from the income test.

How much will be the co-contribution?

If you earn $34,488 or less (for the 2014/2015 year), the Federal Government pays $0.50 (50 cents) for every dollar you contribute to your super fund from your after-tax income, up to a maximum of $500 a year (subject to legislation).
For example, if you make a $1,000 after-tax contribution, your super fund account receives a $500 tax-free contribution from the Government. If you make a $600 contribution, the Government pays $300 into your super fund.

If you earn more than $34,488, your co-contribution entitlement reduces by 3.33 cents for every dollar you earn over $34,488, until it reaches $49,488 (for the 2014/2015 year). For example, if you earn $38,000 and you make an after-tax contribution of $1,000, the Government’s maximum contribution of $500 is reduced by $118, which potentially gives you a co-contribution of $382.

You need to pass the following three tests in order to be eligible for the co-contribution:

1. Work test
In order to satisfy the work test, you must earn 10% or more of your income from eligible employment, 10% or more of your income from carrying on a business, or a combination of both.

2. Income test
The Government’s tax-free co-contribution is available for any person who earns total income from employment or self-employment and earns less than $49,488 a year in the 2014/2015 financial year and makes an after-tax contribution to their super fund. This income threshold is indexed each year in line with the increase in average weekly earnings.

3. Age test
You must be under 71 at the end of the financial year in which you make your after-tax contribution to be eligible for a co-contribution.

In addition to meeting the above three tests, you need to be a permanent resident or citizen and lodge your income tax return to qualify for the Government’s co-contribution.

How to claim?

All you need to do is make a personal after-tax contribution to your super account. This you can do either through your employer or by yourself paying directly to your super fund. The Tax Office will calculate your entitlement using information from your superannuation fund and tax return.

As the end of the financial year is approaching fast you need to ensure that your personal contribution goes to your super account before 30th June in order to qualify for the co-contribution.
The content of this article is intended to provide a general guide to the subject matter. -Specialist advice should be sought about your specific circumstances.