Australians who earn less than $59,980* per annum and make personal after-tax contributions to their super before 30 June 2008, may be entitled to receive a co-contribution from the government. Eligibility has also been extended to the self-employed.
If a person is eligible, the government will contribute $1.50 (up to an annual maximum of $1,500) for each $1 contributed.
AMP Director Personal Wealth Management Andrew Hobern said low and middle-income earners should consider taking advantage of co-contributions.
“Superannuation remains one of the most tax effective ways to save money for retirement and taking advantage of co-contributions can make a big difference to a person’s hip pocket at retirement time,” Mr Hobern said.
“So people don't miss out on the opportunity to boost their super, they can check their eligibility at www.ato.gov.au. If a person is eligible and they make an after-tax contribution before 30 June 2008 they could receive the co-contribution.
“Most people will need at least 65 per cent of their pre-retirement income to maintain an adequate lifestyle in retirement. So for a person who earns $59,980 a year, they will need around $38,980 a year when they retire.
“The more money that people put into their super now, the better their chance of living the lifestyle they want in retirement.”
A person will automatically qualify to receive a government co-contribution, if in the financial year they:
* Earn less than $58,980 per annum (total assessable income and reportable benefits);
* Receive 10 per cent or more of their accessible income and reportable fringe benefits from employment, carrying on a business, or a combination of both;
* Are less than 71 years of age at the end of the financial year;
* Make personal super contributions (after-tax) to a complying superannuation fund;
* Have not held a temporary resident visa during the relevant year; and
* Lodge an income tax return for the relevant year.
AMP has an online checklist for taxpayers to explore other strategies that are also available to them ahead of 30 June 2008. To view the checklist visit www.amp.com.au.
Nicole is 25 years old and has recently completed her university studies. She has started her first job earning $25,000 per annum.
Nicole has heard a lot about the benefits of investing early in super and is interested in the Government co-contribution because a return of 150 per cent is an attractive option.
By making voluntary contributions and receiving the government co-contribution, Nicole would be $181,219 better off after 40 years and would retire with $431,215.
* Earning rate 7 per cent (net of taxes).
* No fees and charges.
* Government co-contribution is assumed to be made at the end of the following year the voluntary contribution is made.
* Voluntary contributions are made evenly over the year.