Salary sacrificing will not increase co-contribution entitlement

Q: I understand salary-sacrificed super contributions must be added back in to assessable income for co-contribution purposes. Do you know anything about this?

Yes, your understanding is correct. Salary sacrificed contributions count towards the co-contribution income test, and this has been the case for quite a few years; specifically since the start of July 2009 (that is, from the start of the 2009/2010 financial year and for future financial years, including the 2014/2015 year and beyond).

What this rule means is that individuals on higher incomes, seeking to access the co-contribution scheme, cannot use salary sacrificing (that is, make before-tax super contributions to their super fund), to lower their income to a level that allows them to receive the tax-free Government co-contribution.

The co-contribution is a tax-free super contribution from the Federal Government when you make a non-concessional (after-tax) contribution. If your ‘total income’ is $34,488 or less (for the 2014/2015 year), the Federal Government pays $0.50 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $500 a year. If your ‘total income’ is more than $34,488, your co-contribution entitlement reduces by 3.33¢ for every dollar you earn over $34,488, until it cuts out at $49,488.

Background: Previously, that is for the 2008/2009 year and earlier financial years, the co-contribution ‘total income’ threshold was: assessable income, plus the value of any fringe benefits that you have as part of your salary package, such as a car. Since the 2009/2010 year onwards, the ‘total income’ definition also includes salary sacrificed contributions. Note that assessable income also includes bank interest and net capital gains from selling shares or property.

For those readers who want to know more about the Federal Government’s co-contribution scheme, I provide a summary of the scheme in the SuperGuide article Cashing in on the co-contribution rules (2014/2015 year).

IMPORTANT: SuperGuide does not provide financial advice. SuperGuide does not answer all questions posted in the comments section. SuperGuide may use your question or comment, or use questions from several readers, as the basis for an article topic that we publish on the SuperGuide website. We will not disclose names or personal information in these articles. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Readers need to seek independent advice about their personal circumstances.


  1. Judy Williams says:

    Great article – wish I had read it before ringing ATO…could have saved me a long wait on the phone

  2. Jim Stephens says:

    I am 62 and currently have no superannuation having opted to invest in commercial property which earns me a good income. I recently sold my house and have over $500,000 to invest. Can I start a SMSF and get some of the tax benefits now?

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