Govt gives some workers 50% bonus
HOW would you like to make a capital guaranteed 50%?
Well, it's possible if you are a low-income worker, thanks to the government's co-contribution program.
It is designed to boost the superannuation of low- income workers who make the effort to pay a little bit more than is provided by the boss.
For the current tax year, the co-contribution is 50% of personal superannuation contributions with a maximum co-contribution of $500 for contributors whose adjusted taxable income for the current financial year is $36,021 or less.
As income rises the co-contribution reduces by 3.333 cents for every dollar of adjusted taxable income exceeding $36,021 in 2016-17, until it reaches or exceeds $51,021.
The co-contribution does not count toward either the concessional or the non- concessional contributions caps.
To be eligible for the co-contribution you must have been a permanent resident of Australia and under 71 years of age at June 30, 2017.
You must lodge a tax return and earn 10% or more of your total income from eligible employment, carrying on a business, or a combination of both.
You are also required to have made a non- concessional contribution of more than $40 to a complying super fund during the financial year ended June 30, 2017.
For co-contribution purposes your income is your adjusted taxable income - a complex definition that includes assessable income, reportable fringe benefits and reportable superannuation.
Now $500 might sound like small bikkies, but imagine you were a low-paid worker aged 40 and managed to contribute $1000 of your own as a non-concessional contribution that would be matched by $500 from the government.
Suppose you kept up this contribution of $1500 a year, until age 65.
Thanks to the magic of compound interest you could have an additional, $109,000 in super by then if your super fund returned 8% per annum.
Imagine what a difference that would make to retirement.
Just keep in mind the contribution must be made before June 30.
Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Email: firstname.lastname@example.org