The superannuation system has a long history with both sides of government shaping the compulsory superannuation system we have today. The establishment of this system in Australia was a response to the financial challenges posed by an aging population. The aim was to have individuals saving for retirement over a working life to relieve the pressure on Australia’s government paid age pension.
Throughout your working life, your employers will make compulsory contributions to your superannuation fund (currently 9.5%). You also have the option to make personal contributions to help build your savings at an accelerated rate.
The government has made superannuation savings attractive as it offers a flat tax rate of 15% on employer contributions and investment earnings (10% on longer-term capital gains if held for more than 12 months).
Reaching your retirement savings goal should not be complicated. You should endeavour to start early and make short-term sacrifices for the longer-term gains. Let time and compound interest do the majority of the heavy lifting for you!
An initiative from the federal government to help boost your superannuation is the co-contribution scheme. If you make a personal after-tax contribution to your superannuation, you may qualify for an additional contribution directly from the government (free money!).
The government will match $0.50 (50 cents) for every dollar you contribute to superannuation up to a maximum co-contribution amount of $500. The maximum super co-contribution is available if your total income is less than $36,813. The maximum co-contribution reduces by 3.33 cents for every dollar earned over $36,813, reducing to zero when your total income is $51,813 (for 2017/2018 financial year).
There are a few basic eligibility criteria to be met in order to qualify:
You must lodge a tax return
At least 10% of your total income comes from employment or carrying on a business
The balance of your super is equal to or less than $1.6 million and
you are less than 71 years of age at the end of the financial year.
Provided you qualify for the co-contributions, and your fund has your tax file number, the government will automatically forward the co-contribution amount to your super fund.
To find out more go to the super co-contribution information page on the ATO website.
This article has not taken into account your objectives, financial situation or needs. You should consider if the advice contained within the articles is suitable for you and your personal circumstances before acting on it. If you would like to discuss the suitability of the advice to your personal situation, please contact us to make an appointment with one of our friendly advisers.