How would you like an extra $1,500 from the Government this year?

With the Government’s Superannuation Co-Contribution Scheme, they could pay up to $1,500 into your superannuation account or Retirement Savings Account.

The Superannuation Co-Contribution Scheme is assistance from the Australian Government to help Australian’s save for their retirement.

Depending on your individual income, the Government could match any payments you personally pay into your super fund or retirement savings account (RSA). The amount the Government will pay is based on a sliding scale.

The Government has recently widened eligibility to include more people. You must:

• earn under $58,000 per year;
• make the personal contributions to a complying superannuation fund or RSA;
• receive 10 or more percent of your income as an employee;
• be under 71 years of age;
• be a permanent Australian resident; and
• lodge an income tax return.

If you earn up to $28,000 per annum, for every $1 you put into your super (up to $1,000) the government will contribute $1.50. If you earn between $28,000 and $58,000, the Government will reduce the amount they pay.

Your total income is calculated by adding your assessable income, plus any Reportable Fringe Benefit amounts. This means that your total income may not equal your taxable income.

Your Co-Contribution amount will not be subject to tax, or affect your Reasonable Benefits limit.

To receive your Co-Contribution, all you have to do is make the payment (or payments) to your super fund or RSA and lodge your income tax return. There are no forms to fill out – the Government does it all for you. You will be notified of any payments the Government has made to your super fund or RSA by letter after your income tax return has been lodged and the amount has been paid into your super account or RSA.

To be eligible this year, make your payments before the 30 June 2006, and to get your Government payment quickly, lodge your 2006 tax return straight away.

Superannuation Tax Planning

Superannuation is a tax driven scheme. Superannuation investment is encouraged through the provision of a range of tax concessions or support from the government. The 2005/2006 financial year is coming to an end and why not take advantage of some of the tax concessions and support the government is offering to provide yourself with a wealthy retirement. Look forward to retirement and not dread it. Your retirement lies in you hands and no longer will become the responsibility of the government.

Salary Sacrifice

High-income earners are generally better off receiving superannuation contributions than salary owing at the high tax rate. If an employee salary sacrifices superannuation contributions they are subject to tax of 15% supposed to the 48.5% they have to pay because they fall in the highest tax bracket. The following table illustrates the age based limits that an employer can make to an individuals superannuation fund.

Note that these age-based limits will be scrapped in future tax years and replaced with a flat $50,000 limit regardless of age.

Government Co contribution

The government co contribution is for low-income earners that earn less than $58,000. For every dollar that low-income earners put into their superannuation funds the government will match with $1.50 up to the amount of $1,500. However this is reduced by 5 cents in every dollar that exceeds $28,000.

Low- Income Spouses Rebate

Taxpayers are entitled to a rebate if they make contributions into there spouses superannuation fund if their spouse is a low-income earner. The spouse’s assessable income and reportable fringe benefits must be less than $13,800.

The rebate is 18% of the lessor of:

• $3,000 reduced by $1 that the spouse’s assessable income and reportable fringe benefits exceed $10,800
• The total of the eligible spouse contribution

Self Employed Persons

Person who are either self employed or do not receive superannuation support from their employer can claim a deduction for personal contributions made to a complying superannuation fund.

The maximum deduction allowable is the lessor of:

• The first $5,000 of contributions plus 75% of the amount contributed in excess of $5,000.
• The person’s age based deduction limit as set out in the table above.

The recent budget allows for a full deduction for superannuation contributions from 1 July 2006 up to the $50,000 limit.