Lexi Webster
The Australian government may match super contributions for low-to-middle-income earners through the super co-contribution payment scheme. The government will match contributions up to a maximum of $500 per financial year. To be eligible, individuals must make personal non-concessional (after-tax) contributions to their super fund and meet certain income and age requirements. The Australian Taxation Office (ATO) calculates eligibility and payment amounts based on tax returns.
| Characteristics | Values |
|---|---|
| Who is eligible for the government's super co-contribution? | Low to middle-income earners |
| How much can the government match? | Up to $500 |
| What is the minimum co-contribution payment? | $20 |
| What is the maximum co-contribution entitlement? | $500 |
| What is the minimum amount of income to be eligible for the co-contribution? | $37,000 |
| What is the maximum amount of income to be eligible for the co-contribution? | $60,400 |
| What is the minimum age to be eligible for the co-contribution? | Under 71 years old |
| What is the maximum total superannuation balance to be eligible for the co-contribution? | $1.6 million to $1.7 million to $1.9 million |
| What is the LISTO? | Low-income superannuation tax offset |
| What is the maximum LISTO entitlement? | $500 |
| What is the minimum amount of income to be eligible for the LISTO? | $37,000 |
| What is the maximum amount of income to be eligible for the LISTO? | $45,400 |
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What You'll Learn
Eligibility for government co-contribution
The Australian government's super co-contribution scheme is an incentive program to help low-to-middle-income earners save for their retirement. The government will match your eligible superannuation contributions up to a maximum of $500 per financial year. The co-contribution amount depends on your income and how much you contribute.
To be eligible for the super co-contribution, you must:
- Make one or more personal non-concessional (after-tax) contributions to your complying super fund during the financial year.
- Pass the two income tests (income threshold and 10% eligible income tests).
- Be less than 71 years old at the end of the financial year.
- Not hold a temporary visa at any time during the financial year (unless you are a New Zealand citizen or it was a prescribed visa under subsection 20AA(2) of the Superannuation (Unclaimed Money and Lost Members) Act 1999).
- Have a total superannuation balance of less than $1.6 million on 30 June of the year before the year the contributions are being made.
- Have not exceeded your non-concessional contributions cap in the relevant financial year.
- Earn less than $45,400 in the 2024-25 financial year to be eligible for the maximum co-contribution of $500. If you earn between $45,400 and $60,400, you may still receive a partial co-contribution.
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Calculating government co-contribution
The Australian Taxation Office (ATO) calculates how much co-contribution you should get, and then the government pays the co-contribution directly to your super account. The government will match your contribution up to a maximum of $500. The amount of co-contribution you receive depends on your income and how much you contribute.
To calculate your super co-contribution, the ATO uses your tax return, including the Government super contributions labels, to work out your total income and eligible income. It's not compulsory to complete the Government super contribution labels, but if they are not completed, you may not receive your correct co-contribution payment.
If you don't earn any income from partnerships, trusts, or a shared income group, you won't need to complete the additional labels or associated worksheets. If you have more than one fund and you want your co-contribution paid to a particular fund, you will need to contact the ATO. It is important to nominate the fund before you lodge your tax return.
You can use the ATO's super co-contribution calculator to estimate your co-contribution entitlement and eligibility. The ATO will pay the co-contribution directly to your fund if you are eligible. You don't need to apply for the co-contribution. When you lodge your tax return, the ATO will work out if you are eligible. If you are eligible, they will automatically pay the co-contribution into your super account.
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Low-income superannuation tax offset (LISTO)
The Low-Income Superannuation Tax Offset (LISTO) was introduced in the 2016-17 Budget to replace the Low-Income Superannuation Contribution (LISC). LISTO is designed to assist low-income earners in saving for their retirement. If you earn an adjusted taxable income of up to $37,000 per year, you may be eligible to receive a refund into your superannuation account of the tax paid on your eligible concessional superannuation contributions, up to a cap of $500 per year. The LISTO payment is calculated using your tax return, including the Government super contribution labels, to determine your total income and eligible income. It's important to note that you don't need to apply for LISTO or any other government super contributions. The Australian Taxation Office (ATO) will automatically pay the contribution into your super account if you are eligible and your fund has your tax file number (TFN).
The introduction of LISTO addressed an issue highlighted by the Henry Review, which pointed out that low-income earners were not adequately served by the previous superannuation tax concessions. The tax rate of 15% levied on contributions into superannuation is higher than the average tax rate paid by low-income taxpayers, resulting in no tax advantage for them to accumulate superannuation. In contrast, high-income taxpayers benefit from a tax saving of 32% by saving into superannuation. LISTO aims to provide a more equitable solution by offsetting the tax paid by low-income earners' super funds.
It's worth mentioning that LISTO is just one of the government's super co-contribution initiatives. If you're a low or middle-income earner and make personal non-concessional (after-tax) contributions to your super fund, the government may also make a co-contribution of up to $500 per year. The co-contribution amount depends on your income and how much you contribute. Similar to LISTO, you don't need to apply for this super co-contribution. The ATO will determine your eligibility when you lodge your tax return and make the payment directly to your super account if you qualify.
To ensure you receive the correct co-contribution payment, it's important to complete the Government super contribution labels on your tax return. Additionally, if you have multiple super funds and want your co-contribution paid to a specific fund, you must notify the ATO before lodging your tax return. By choosing a super fund that accepts both personal and super co-contributions, you can maximize your super savings over time.
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Making personal contributions
If you're a low or middle-income earner, the Australian Government may help boost your super savings through the super co-contribution payment. Depending on your income and how much you contribute, the government will match your contribution up to a maximum of $500 per financial year. To be eligible for the super co-contribution, you must make one or more personal non-concessional super contributions to your complying super fund during the financial year, pass the two income tests (income threshold and 10% eligible income tests), and be less than 71 years old at the end of the financial year.
You don't need to apply for the super co-contribution. When you lodge your tax return, the Australian Taxation Office (ATO) will work out if you're eligible and pay the co-contribution directly to your super account. You can use the ATO super co-contribution calculator to estimate your co-contribution entitlement and eligibility. To ensure you receive the co-contribution for a particular financial year, your personal contributions must reach your super fund by 30 June.
If you have more than one super account, you must tell the ATO your chosen fund for co-contributions. You can do this through myGov by linking your account to the ATO and following the prompts to nominate your preferred fund. It is important to nominate the fund before lodging your tax return. Additionally, you should check that your chosen fund accepts both personal and super co-contributions.
If you're on a low income, you may also be eligible for the low-income super tax offset (LISTO). The LISTO refunds up to $500 of the tax on your concessional contributions back into your super account each year if you're eligible.
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Tax implications of super contributions
In Australia, superannuation is taxed, but usually at a lower rate than your regular income. The government also offers tax concessions on super contributions to encourage people to save more for retirement.
There are two types of super contributions: before-tax (concessional) and after-tax (non-concessional). Each has its own tax implications. After-tax contributions are not taxed in the fund, but earnings on these contributions are subject to tax of up to 15%. Before-tax contributions are taxed at 15%, but only up to $30,000 per financial year. This is known as the concessional contributions cap. Any amount over this will be included in your assessable income and taxed at your marginal rate at the end of the financial year, in addition to the 15% already paid. This is known as Division 293 tax, and it applies if your Division 293 income and concessional contributions are more than $250,000 per year.
If you are a low-income earner, you may be eligible for a refund of any tax paid on your concessional contributions of up to $500 per year. This is known as the Low Income Superannuation Tax Offset (LISTO). You can also carry over unused concessional contributions for up to five financial years, as long as your total super balance is less than $500,000 on 30 June of the previous financial year.
If you are a middle-income earner, you may be eligible for the super co-contribution scheme. Under this scheme, the government will match your personal super contributions up to a maximum of $500 per year, depending on your income level. To be eligible, you must make at least one personal non-concessional contribution during the financial year, pass the income tests, and be less than 71 years old at the end of the financial year.
It is important to note that if you withdraw a lump sum from your superannuation before turning 60, you may pay tax on any taxable component. If you are under your preservation age, you will be taxed on the taxable component at your marginal tax rate or 22%, whichever is lower.
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Frequently asked questions
A super co-contribution is a payment made by the Australian Government to help low-to-middle income earners save for their retirement.
The government will match your contribution up to a maximum of $500 per financial year. If you are eligible for a low-income contribution of less than $10, the Australian Taxation Office (ATO) will round this up to $10.
You can check your eligibility by visiting the ATO website and using their super co-contribution calculator. You can also use the ATO LISTO calculator to estimate how much you could receive.
You don't need to apply for a super co-contribution. When you lodge your tax return, the ATO will work out if you are eligible. If you are eligible, they will automatically pay the co-contribution into your super account.
To receive a super co-contribution, you must make a personal contribution into your super fund before the end of the financial year. Your personal contributions must reach your super fund by 30 June for you to receive a government co-contribution for that financial year.
