The Federal Government for the 2012/2013 financial year proposed some substantial changes to the ‘Government Co-Contribution’ scheme with effect from the 1st July 2012. The Government Co-Contribution for 2013 has been reduced from $1,000 to $500 as has the contribution match falling from 100% to 50%. There has been no change to the income threshold levels for the scheme remaining at $31,920. The reduction in government co-contribution is attributed to fund other superannuation measures for example the ‘low income super contribution’ of $500.
With the amount payable as a Government Co-Contribution in 2013 reducing, so has the effective upper income limit. Until July 1st 2012, individuals earning up to $61,920 still qualified for a co-contribution of some value, however as the payment available has reduced, this has effectively reduced the upper income threshold to $46,920 to qualify a co-contribution payment.
The payment reduction factor of 0.33 for income earnings over $31,920 still remains the same. As such the Government Co-Contribution available will reduce by 3.333 cents for every extra $1 earned over the $31,920 threshold with no payment available for incomes over $46,920.
The changes on the Government Co-Contribution for 2013 has impacted individuals earning above $37,000 (upper threshold for the low income superannuation contribution) who do not qualify for the low income superannuation contribution and will see the available co-contribution reduce. Of greater impact is people earning between $46,920 and $61,920 who as of 1st July 2012 will not have access to the new Low Income Superannuation Contribution Scheme and will now no longer be eligible for the Government Co-Contribution.
In spite of the changes to the Government Co-Contribution for 2013, qualifying individuals still have access to the superannuation concessional contributions cap of up to $25,000 per annum and can still make deductible superannuation contributions via employee salary sacrifice or for the self-employed, as a deductible contribution.
As a result of the changes to Government Co-Contribution benefits for this financial year, contribution strategies need to be reviewed incorporating the impact on changing personal income taxation rates for concessional superannuation contributions.
- the maximum co-contribution provided will be $500
- the matching rate to be reduced to 50% from 100%
- The Income Threshold will stay at $31,920 with the upper threshold reducing to $46,920
Contact Primoris Financial for assistance in increasing superannuation contributions to take advantage of possible superannuation contribution benefits. Request superannuation advice here