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The Government co-contribution is an initiative that gives eligible low income earners the ability to boost their superannuation savings by matching personal non concessional contributions up to $1,000.

Although the matching payment has been reduced over recent years, the initiative is still a positive measure for boosting retirement benefits.

An eligible person does not need to apply for the payment. All they need to do is make a personal non concessional contribution to their superannuation account and lodge an income tax return. Most Government co-contribution payments are made to the superannuation account between November and January.

The co-contribution is not subject to contributions tax when it's paid into the fund and is not measured against the member's non concessional contribution cap. The benefit is preserved in the account and any earnings within the fund are taxable.

Eligibility

A person will be eligible for a Government co-contribution if they meet the following criteria:

  • make one or more eligible personal non concessional contributions to a complying superannuation fund during the financial year and have not claimed a tax deduction on the contribution,
  • total income (minus any allowable business deductions) for the financial year is less than the higher income threshold,
  • 10% or more of total income comes from eligible employment related activities, carrying on a business or a combination of both
  • lodge their income tax return, and
  • they did not hold an eligible temporary resident visa at anytime during the financial year, unless they are a New Zealand citizen or holder of a prescribed visa.

Income tests

To qualify for the co-contribution, two income tests apply. Both tests must be met for a person to qualify.

  1. Income threshold test
  2. 10% eligible income test

Income threshold test

Total income is determined by the following formula:

Assessable Income + Reportable Fringe Benefits + Reportable Employer Super Contributions – Allowable Business Deductions

The amount of co-contribution a person can receive is dependent on their total income. Where total income is less than the lower income threshold an eligible person may receive the full co-contribution payment. Where total income is less than the higher threshold and more than the lower threshold, the entitlement will be reduced. The table below outlines the threshold and reduction rates.

 

10% eligible income test

The eligible income test has been amended over time to allow self employed and substantially self supported persons to qualify for the co-contribution. To qualify under the income test 10% or more of a person’s total income must come from employment related activities, carrying on a business or a combination of both. Total income is not reduced by allowable business deductions. This measure was implemented to ensure self employed persons were not disadvantaged by arbitrarily falling short of the 10% requirement.