Noel Whittaker
Noel Whittaker

Low income earners hurt by changes

THE Federal Government has delivered another blow to low income earners with the changes to the superannuation co-contribution rules that will take place next July. 

The Howard-Costello government introduced the scheme to encourage low income earners to save - initially the government made a co-contribution of $1,500 if the employee made a personal non concessional contribution  of $1,000.

Subsequently the Labor Government have watered down the scheme by reducing the amount of the contribution and also by freezing the cut off points.

For the current tax year, the co-contribution is $1 for every $1 of personal superannuation contributions with a maximum co-contribution of $1,000 for contributors whose assessable income for the current financial year is $31.920 or less. As income rises the co-contribution reduces by $33 for each $1,000 of additional income, until it cuts out at $61.920 a year.

Under the latest changes, the co-contribution matching rate will be reduced from 100% to 50% in July 2012 with a maximum co-contribution of $500. This means eligibility will cut-out for people on adjusted taxable incomes of $46,920 or more.

For co-contribution purposes income is assessable income plus reportable fringe benefits. To be eligible for the co-contribution, you must have received at least 10 percent of your income from what is called "eligible employment" - usually income from salary or wages or from self employment. 

One of the greatest problems facing the country is financial literacy. The co-contribution scheme was a big step towards helping people to invest for themselves because it encouraged them to contribute to their own super, in addition to that being paid by their employer. It is sad that budgetary constraints have watered down the scheme to such a high degree.

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is Or follow him on Twitter @NoelWhittaker.

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