Superannuation strategies

A super boost could help your savings grow

The end of the financial year is a time when you may try to get your finances in order. This could involve organising your tax return, setting future financial goals or working out how to increase your super savings. So, before 30 June arrives, why not consider topping up your super and if you qualify, receive a co-contribution from the government? That’s right – if your total income is less than $61,920 p.a.1 the government could top up your super with up to $1.00 for every dollar of personal after-tax contributions you make, up to a maximum of $1,000 in the 2009-2010 financial year. To put these numbers in perspective, let’s look at an example below. Meg is 40 years old and earns $27,000 each year. She has no other taxable income and wants to invest an extra $1,000 each year from her after-tax salary. If Meg chose to invest this money outside of super – she would add $1,000 a year to her investment. However, if she made a super contribution, the government will be investing an additional $1,000 so her total investment in year one is $2,000.

If Meg invested $1,000 after-tax each year which was matched by the government co-contribution, in 25 years time she could end up with substantially more in her superannuation account, compared to investing the $1,000 outside the superannuation environment. You don’t need to be a maths expert to see the obvious difference co-contributions could make to your retirement savings!

But there’s more…

By taking advantage of the government co-contribution scheme you will not only help grow your super, but benefit from some handy tax savings. Any investment earnings generated through super are taxed at a maximum rate of 15 per cent. This is potentially a lot less than the tax payable on investments outside of super which is based on your personal marginal tax rate.

Can I take advantage of the government co-contributions?

There are a number of criteria that you need to meet to be eligible to receive the government co-contribution. You may be eligible for a super co-contribution in 2009/2010 if you meet the following criteria:

• you earn less than $61,920;
• you make personal after-tax contributions to a complying superannuation fund or Retirement Savings Account (RSA) by 30 June 2010;
• you are under 71 years of age at 30 June 2010;
• you lodge an income tax return for the 2009-2010 financial year;
• you are a permanent Australian resident for the entire financial year; and
• you receive at least ten per cent of your total income from eligible employment including income from self-employment.

The scheme works on a sliding scale - the less you earn, the more your co-contribution may be.

The maximum co-contribution of $1,000 is payable if you earn $31,920 or less in the 2009-2010 financial year and cuts out altogether when you earn $61,920 or more.

Claiming your super co-contribution couldn’t be easier

You don’t need to apply for the co-contribution. All you need to do is make a personal after-tax contribution to your super fund by 30 June 2010 and lodge an income tax return for the 2009-2010 financial year.

The Australian Taxation Office (ATO) will work out if you are eligible by using information provided by your super fund. The co-contribution will then be calculated and automatically deposited into your super account.

It’s that simple.

Next steps

It’s easy to make a personal after-tax contribution to your super fund via BPAY®, cheque or through your employer.

To make a payment via BPAY, click on the BPAY icon for instructions.

If you wish to make a payment by cheque, go to the Forms and Publications page to download and complete the Contribution form and mail it with your cheque to Plum .

Or to make a payment through your employer, talk to your Payroll / Human resources / Personnel Department (as applicable) about the various payment options available.

Remember, to qualify for the Government co-contribution, your personal after-tax contribution must be received by your super fund by Wednesday 30 June 2010.

Additional information

For more information on the Government co-contribution scheme please go to the Forms and Publications page and download the Government co-contributions strategy guide.

Alternatively, visit www.plum.com.au or contact a Plum Member Services Consultant on 1300 55 7586, any business day, 8.00am to 6.00pm, Melbourne time.

¹ Including assessable income and reportable fringe benefits.