END OF FINANCIAL YEAR STRATEGIES
By James Malliaros
Following on from the previous email on maximising concessional (pre-tax) contributions into superannuation, this week’s email looks at other strategies that may help in boosting your superannuation savings.
These strategies are the Government Co-Contribution and Eligible Spouse Contribution.
For eligible people who make personal non-concessional contributions to superannuation, the Government will also kick in up to a further $500 into their superannuation account.
How does the Co-contribution work?
If you earn less than $37,697 in the 2018/19 Financial Year, make a personal non-concessional contribution to superannuation and meet other eligibility criteria, the Government will assist your retirement savings by making an additional contribution on your behalf at the rate of 50 cents for every $1 you put in, up to a maximum of $500.
What are the eligibility criteria?
You will be eligible for the superannuation co-contribution in this Financial Year if:
- You make personal non-concessional (after-tax) contributions to a complying superannuation fund;
- Your total income is less than $52,697;
- At least 10% of your “Total Income” is from eligible employment, carrying on a business, or a combination of the two;
- You do not hold an eligible temporary resident visa during the Financial Year;
- You are under age 71 at the end of the Financial Year;
- Have a total superannuation balance of less than $1.6 million as at 30 June 2018; and
- You lodge a tax return.
“Total Income” is your assessable income plus reportable fringe benefits plus reportable employer superannuation contributions (essentially salary sacrificed contributions in excess of superannuation guarantee amounts).
Calculating the Co-contribution amount
If your total income is less than $37,697, the Government will contribute 50 cents for every $1 you contribute, up to a maximum of $500.
However, if your total income is between $37,697 and $52,697, the co-contribution entitlement reduces by 3.33 cents for every dollar you earn over $37,697.
The table below details the level of Government co-contribution that you will receive based on your total income.
|$37,697 or less||$500||$400||$250||$150|
|$52,697 or more||$0|
Eligible Spouse Contribution
An eligible spouse contribution is simply a superannuation contribution you can make on behalf of your spouse. There are rules on when a person can make an eligible spouse contribution and also who can be classified as an ‘eligible spouse’.
The spouse contributing can be any age and does not have to meet any employment rules. However, if the spouse receiving the contribution is age 65 or over, they need to have been gainfully employed for at least 40 hours within a period of 30 consecutive days in the Financial Year. Contributions cannot be made once the spouse receiving the contribution reaches age 70.
If the spouse’s total income (as already outlined under the Co-contribution) is less than $37,000 ($10,800 in previous years), you can claim an 18% tax offset on the first $3,000 of contributions that you make to their account. The maximum offset is $540 and is reduced by $1 for every $1 by which the total of assessable income exceeds $37,000. No tax offset is payable when income reaches $40,000. The offset is also reduced if the contribution you make is less than $3,000.
Both the Government Co-Contribution and Eligible Spouse Contribution are options to help build your retirement savings.
To take advantage of these strategies, you need to ensure that the contributions are made into your superannuation fund before Friday 28 June. If you need assistance in understanding if these strategies are of any benefit to you, please contact your adviser.
If you have any questions or comments, please email me at email@example.com
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