Increase Your Superannuation Benefit with Government Contributions
For those that want to save for a more comfortable and secure retirement, a superannuation fund can prove invaluable. These funds provide a tax effective way of saving for retirement, enabling you to ensure that you have the means to enjoy your retirement without the constant worry of having enough money. With the plans that many of us make for the future when we no longer have to work, having adequate funds is essential as otherwise it is not just your dreams of an enjoyable retirements that could sail out of the window but also your ability to fund day to day living costs.
With a superannuation fund you get to enjoy a variety of tax breaks and benefits that are designed to boost your savings, making supers a great way to fund your golden years. There are a number of government related and tax related benefits that those with super funds, one of which is the superannuation government co-contribution. This is an important government initiative that could help to boost your superannuation savings for the future.
Who is eligible for the government co-contribution?
Factors that would make eligible for a co-contribution are as follows:
- You make a personal, after tax contribution to your superannuation fund or retirement savings account (RSA) before June 30.
- 10% of your income comes from your eligible employment, running a business or both.
- You are 71 years or less at the end of the income year.
- You are not holding a temporary resident visa any time within the income year.
- You lodge your income tax return for the next income year.
- Your total income is under $21, 920.
How is the government co-contribution initiative affected in terms of tax?
Of course, one thing that many people are keen to find out is how the government co-contribution initiative is affected in terms of tax. When it comes to tax it is worth bearing in mind that the super co-contribution:
- Is not liable to be taxed when it is paid to your superannuation fund or to your RSA
- Is not classed as income when you file your tax return
- Is tied up in your RSA or superfund where it cannot be accessed until such as time when other funds that are tied up in the superfund or RSA can be accessed
Steps to receive the contribution
There are three ways you can make your co-contribution before the end of the financial year. Through
- Salary deduction. You could ask your employer how to make an after-tax contribution.
- Direct Debit
- BPay
The Government, on the other hand, will automatically forward the co-contribution amount to your super account once you are qualified and have submitted a tax return before June 30 of that year. The Tax Office will then send you a letter about your co-contribution details once it has been received in your account.
Receiving Co-Contributions
After discussing the features and eligibility, the next important point is how to receive your co-contribution. If you are eligible to receive your co-contribution, it would be automatically added to your fund or RSA after meeting the requirements made in that income year.
- You have made an eligible contribution to your super account before June 30.
- You have lodged an income tax return.
- You have not claimed any deduction for all your personal contributions in your income tax return
- Your super contribution for your super fund has been reported to the ATO.
- ATO has received any additional documents they might require.
On the other hand, you will not be directly paid of any co-contributions under events such as:
- You have retired due to permanent disability or reached the required preservation age and has no existing eligible super account.
- You are the legal representative of a deceased account holder.
Your co-contributions are not taxed when it is paid through your super fund or received as a benefit. On the other hand, all earnings made on the super co-contribution will be taxed.
There are a lot of benefits through the superannuation co-contribution. With time and a good strategy, you will soon be earning the rewards and benefits of your super.
Core benefit of the Government Co-Contribution
If you are eligible for the government co-contribution initiative you will find that your super fund can really be boosted, which is great news for you in terms of your future retirement. When we are younger many of us tend not to give retirement a second thought because it seems a lifetime away. However, it soon catches up with us and all too often we suddenly realise that we have not taken adequate steps to protect our financial futures in retirements. The government co-contribution initiative helps to ensure that your funding is given that little extra boost, which could ultimately make a big difference.
The reason why the government provides initiatives and tax breaks such as these it to encourage people to save more towards their retirements. The public purse can only go so far when it comes to providing pensions and with people living much longer these days, along with tax shortages stemming from people not working, the government has to do all it can to encourage workers to take matters into their own hands when it comes to saving towards their retirements. With initiatives such as these those who are taking responsibility for saving towards the future can really benefit through having their super savings boosted.
