Q: Does a co-contribution received after using up the total bring forward cap of $300,000 mean that an excess contribution has been made, or is the Government co-contribution excluded from the after-tax contribution cap?
A: A superannuation co-contribution is a super contribution paid by the federal government into your super fund when you make a non-concessional (after-tax) contribution in a financial year, and your income is below a certain threshold, and you satisfy the other eligibility requirements.
Although the co-contribution is treated as a non-concessional contribution, the co-contribution is not counted towards an individual’s non-concessional cap, irrespective of when the co-contribution is paid into a super account. The annual non-concessional cap is $100,000 a year for the 2018/2019 year, and up to $300,000 if an individual is eligible to use the bring-forward rules (these caps apply for the 2018/2019 financial year).
How does the co-contribution scheme work?
If you earn $37,697 or less (for the 2018/2019 year), the federal government pays $0.50 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum co-contribution of $500 a year. If you earn more than $37,697, your co-contribution entitlement reduces, until it cuts out at $52,697 (for the 2018/2019 year).
For the 2017/2018 year: If you earn $36,813 or less (for the 2017/2018 year), the federal government pays $0.50 for every dollar you contribute to your super fund in after-tax dollars, up to a maximum co-contribution of $500 a year. If you earn more than $36,813, your co-contribution entitlement reduces, until it cuts out at $51,813 (for the 2017/2018 year).
Must-dos before co-contribution is paid
Before you can make a non-concessional (after-tax) contribution, you must provide your tax file number to your super fund (for more information, see SuperGuide article Super for beginners, part 14: Save tax – Supply TFN to your super fund).
Before the federal government will pay you a co-contribution, you must have lodged your tax return for the financial year in which you made your non-concessional contribution. Before the federal government pays your co-contribution, they must have received information about the amount of non-concessional contributions that you have made for the year, from your super fund (this is generally reported by 31 October for the financial year ending 30 June).
Important: If you have exceeded your annual non-concessional contributions cap, or your Total Superannuation Balance is more than $1.6 million, then you will not be eligible for government co-contributions (for more information, see Superguide article Total Superannuation Balance: 7 reasons why your TSB matters).
For more information…
You can find more information about the co-contribution rules and the rules relating to non-concessional contributions in the following SuperGuide articles:
- Cashing in on the co-contribution rules (2018/2019 year)
- Your 2018/2019 guide to non-concessional (after-tax) contributions
- Salary sacrificing will not increase co-contribution entitlement
- Super contributions: How much co-contribution will I get?
- Co-contributions: Can I claim the tax-free bonus as a property investor?
- Want to make 50% return on your super contribution?