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Super co-contributions

Individuals may be eligible for a Government super co-contribution.

A Government co-contribution means the Government adds to your super. You may be eligible for the super co-contribution, low-income super contribution (LISC) from the 2012-13 to 2016-17 financial years, or low-income super tax offset (LISTO) from 1 July 2017.

Super co-contribution
The Government will make a co-contribution of up to $500 if you are a low or middle-income earner and make personal (after-tax) contributions to your fund.

The eligibility conditions for a co-contribution from the 2017-18 financial year include:
a total superannuation balance less than the general transfer balance cap for that year
the contribution you made to your super fund must not exceed your non-concessional contributions cap for that year.

Low-income super contribution
The low-income super contribution (LISC) is a Government super payment of up to $500 to help low-income earners save for retirement.

If you earn $37,000 or less a year, you may be eligible to receive a LISC payment directly into your super fund.

The LISC is 15 per cent of before-tax super contributions made you or your employer from the 2012-13 to 2016-17 financial years.

If you have reached your ‘preservation age’ and are retired you can apply to have your LISC paid directly to you.

Low-income super tax offset
The low-income tax offset (LISTO) was introduced from 1 July 2017. If you earn income up to $37,000, you may be eligible to receive a refund into your super account. This is on the tax paid on your concessional super contributions up to a cap of $500.

This means most low-income earners will pay no tax on their super contributions.

Posted on 18 October '17 by , under Super.

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Self-managed super funds (SMSF) aren’t just about financial investment

Individuals may be looking to opt for an SMSF because these provide entire control over where the money is invested. While this sounds enticing, the downside is that they involve a lot more time and effort as all investment is managed by the members/trustees.

Firstly, SMSFs require a lot of on-going investment of time:

  • Aside from the initial set-up, members need to continually research potential investments.
  • It is important to create and follow an investment strategy that will help manage the SMSF – but this will need to be updated regularly depending on the performance of the SMSF.
  • The accounting, record keeping and arranging of audits throughout the year and every year also need to be conducted up to par.

Data shows that SMSF trustees spend an average of 8 hours per month managing their SMSFs. This adds up to more than 100 hours per year and demonstrates that compared to other superannuation methods, is a lot more time occupying.

Secondly, there are set-up and maintenance costs of SMSFs such as tax advice, financial advice, legal advice and hiring an accredited auditor. These costs are difficult to avoid if you want the best out of your SMSF. A statistical review has shown that on average, the operating cost of an SMSF is $6,152. This data is inclusive of deductible and non-deductible expenses such as auditor fee, management and administration expenses etc., but not inclusive of costs such as investment and insurance expenses.

Thirdly, investing in SMSF requires financial and legal knowledge and skill. Trustees should understand the investment market so that they can build and manage a diversified portfolio. Further, when creating an investment strategy, it is important to assess the risk and plan ahead for retirement, which can be difficult if one is not equipped with the necessary knowledge. In terms of legal knowledge, complying with tax, super and other relevant regulations requires a basic level of understanding at the very least. Finally, insurance for fund members also needs to be organised which can be difficult without additional knowledge.
Although SMSFs have the advantage of autonomy when it comes to investing, this comes at a price. Members/trustees need to invest time and money into managing the fund and on top of this, are required to have some financial and legal knowledge to successfully manage the fund.

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