Co-contributions: Can I claim the tax-free bonus for the financial year that I retire?

Q: I’m aged 69 and I will retire in December 2010. Am I entitled to make a deposit into my super fund and receive the Government co-contribution for the 2010/2011 year?

Background: 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 $31,920 or less (for the 2010/2011 year), the Federal Government pays $1.00 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum of $1,000 a year. If your ‘total income’ is more than $31,920, your co-contribution entitlement reduces by 3.33¢ for every dollar you earn over $31,920, until it cuts out at $61,920.

Generally speaking, an individual is eligible for the co-contribution where the individual has been an employee, or carried on a business during a financial year, even for part of the year, subject to satisfying the work test, income test and age test associated with the co-contribution scheme.

Retiring in a financial year will not necessarily preclude someone from claiming the co-contribution, but it may affect an individual’s ability to meet the co-contribution work test (10% or more of total income from employment or carrying on a business, or a combination of both).

I explain the eligibility rules in the article Cashing in on the co-contribution rules. The ATO website also has some useful information on the co-contribution rules: For example, quoting directly from the ATO website:

You may be eligible for the super co-contribution if all of the following apply:

• you make an eligible personal super contribution by 30 June each year into a complying super fund or RSA and don’t claim a deduction for all of it
• your total income (minus any allowable business deductions) is less than the higher income threshold
• 10% or more of your total income is attributable to eligible employment-related activities, carrying on a business or a combination of both
• you are less than 71 years old at the end of the year of income
• you are not the holder of a temporary visa at any time during the income year, unless you are a New Zealand citizen or holder of a prescribed visa
• you lodge your income tax return for the relevant income year.

Your super fund needs your tax file number (TFN) before it can accept your personal contribution or a super co-contribution from us.

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