TLDR:
- You could get a boost of up to $500 to your super, paid for by the Australian government.
- To be eligible you need to meet certain criteria, such as being paid less than $58,445 over the 2023-24 financial year, or $60,400 over the 2024-25 financial year, and submitting a tax return.
- You also need to make your own extra after-tax contribution to your super fund.
- The money from the government will be added to your super fund once you’ve submitted your tax return.
- You can do this every financial year while you remain eligible.
The detail
Superannuation is compulsory for many Australians. Each time you get paid, your employer sends 11% to your super fund for you to access when you turn 60. This is called the super guarantee. It’s scheduled to increase by 0.5% a year until 2025, at which point it will account for 12%.
In strictly financial terms, the more money you have in your super fund, the better your retirement will be.
So it makes sense to try to maximise it, and because you’re young and have time on your side, it can make sense to get started early.
There are a bunch of ways you can maximise your super but perhaps the easiest is to get the government to do it.
What is the government co-contribution?
If you’re a low or middle-income earner, earning up to $8,445 in the 2023-24 financial year, the Australian government will contribute to your super as long as you make an after-tax voluntary contribution first.
(In 2024-25 the income limit will change to $60,400.)
You could receive up to $500 extra in your super fund each financial year that you’re eligible.
It might not sound like a lot, particularly when you generally won’t be able to spend it until you turn 60 – but with the magic of compound interest, that extra $500 could for example turn into an extra $2,758 if you give it enough time to grow (in this case, 35 years at a rate of 5% p.a., not including fees or taxes - though, as with all investments, performance is never guaranteed.)
And you can do it every financial year until your income exceeds the limit.
How to take advantage
The ATO has a co-contribution calculator that you can use to work out how much you can anticipate being eligible for. It’s a little bit tricky, but you can pretty much assume that you’ll receive something extra as long as you make less than $58,445 in a year, and contribute up to $1,000 extra, after-tax. The minimum amount you’ll receive from the government is $20.
To actually make a contribution, it can be as easy as using BPAY, direct debit or a bank transfer to your super fund, depending on what your super fund offers. You may need to contact your super fund for details, or look for it in your super fund’s app.
You don’t have to make your after-tax contribution all at once, either. For example, if you’re planning to contribute $1,000 over the year, you could split it into weekly $20 payments.
Are you eligible?
To take advantage of the government super co-contribution, you’ll need to meet a few eligibility requirements first. These include:
- You must be earning less than $58,445 (for the financial year 23/24).
- Your total super fund balance must be less than $1,600,000.
- You must be under the non-concessional cap of $110,000 (this is the total amount of super you’ve paid from your after-tax income).
- You must lodge a tax return.
- You must be under 71 years old at the end of the financial year.
- You mustn’t hold a temporary visa at any time during the financial year.
- At least 10% of your income must come from carrying on a business, employment activities, or both.
Keep in mind
If you want to take advantage of the co-contribution, you can’t also claim this amount as a tax deduction. We recommend asking your accountant or other financial professional to help you figure this part out, and for any other tax advice you need.
You’ll need to make a contribution from your own after-tax income, and you won’t be able to access this money until you retire.
There are other ways to grow your super fund but this one’s pretty easy and you can get started immediately.
Is it worth it?
Let’s say you just meet the criteria and the government deposits $20 into your super fund as a once off contribution. Because you generally can’t access your superannuation until you meet a condition of release, it might hang out in your super fund for 30 years. If this $20 compounds at 5% p.a., in time, it could end up being worth an extra $66. (Again, this is hypothetical. It doesn't include fees or taxes and performance is never guaranteed.)
We say get that money. Every bit helps.
But even better, it means that you’ll do something that many people never do, and meaningfully engage with your super. It will help you take control of your financial future.
Here’s what our community said
We asked our Spaceship community about the methods they use to grow their super fund and the government co-contribution came up a lot.
Without naming names, one person said, “I make sure that I add up to $1,000 in voluntary contributions to my super (fund) so I get the $500 government co-contribution… because who doesn’t love free government money.”
“(I’m) contributing $1,000/year after tax to take advantage of the government’s (up to) $500 co-contribution,” said another.
And it’s also been a gateway into bigger things for this community member:
“Last year I invested $1,000 to get the government's co-contribution scheme. This financial year, with a new job and a pay rise, I'm trying to put in $15,000 to max out the amount I can put in this year for the First Home Super Saver Scheme. Easy way to make sure I keep the money safe whilst significantly reducing tax. $5,942 invested in it since July 1 (the beginning of the financial year), so on track for it to be full by [the] end of December!”
So, it’s over to you. Are you eligible for the co-contribution scheme, and will you take advantage of it?
