How does a free $500 bump to your super sound? If it sounds pretty good, you might want to look into the Australian government’s super co-contribution scheme. For lower income earner, the scheme lets you access a bonus of up to $500 by making a voluntary contribution to your super . Here's how it works.

What is the super co-contribution scheme?

The super co-contribution scheme is an Aussie government initiative designed to help low to middle-income earners boost their super.

For every dollar you put into your super as a personal non-concessional contribution (simply a fancy way of saying ‘after-tax contribution’), the government will match it by 50c, as long as you're eligible.

The maximum amount the government will contribute is $500. So if you put in $1000, you may get $500. If you put in $300, you may get $150.

The amount you’re eligible for (and indeed whether you’re eligible at all) depends on your income and the amount you contribute to your super. If you’re curious about how much you could receive and the eligibility requirements, you can use the ATO’s super co-contribution calculator .

Who can benefit from the scheme?

As we mentioned above, the scheme is designed purely for low to middle-income earners. The income cap changes each year, but in the 2023-24 financial year, you need to be earning less than $58,445 to be eligible for a government co-contribution. And to get the maximum payment of $500, you have to earn less than $43,445 in the 2023-24 financial year.

If you earn somewhere between $43,445 and $58,445, the maximum amount you’re entitled to will gradually decrease in line with your income.

The government also has other eligibility criteria for the scheme:

• You must make one or more personal non-concessional (after-tax) super contributions to your super fund in that financial year
• You have to pass two income tests: the first is the one we outlined above, and the second is a requirement that at least 10% of your income comes from employment or self-employment. This means it can’t be something like rental income or share dividends
• You have to be younger than 71 at the end of the financial year
• You can’t hold a temporary visa at any point of that financial year (except under certain circumstances, like being a NZ citizen)
• You have to lodge your tax return for that financial year
• Your super balance needs to be less than the general transfer balance cap at the end of 30 June of the last financial year
• You can’t have contributed more than the non-concessional contributions cap of $110,000 for the 2023-24 financial year

Are there any tax benefits to the scheme?

To take up the government’s co-contribution, you’ll have to make an after-tax contribution.

After-tax contributions are different from concessional contributions, which are payments you make to your super from your pre-tax income . Concessional contributions include mandatory payments made by your employer, salary sacrifice and voluntary contributions . Many Aussies take advantage of concessional contributions because they may offer tax benefits – namely, they’re taxed at a lower rate of 15% instead of the marginal tax rate.

After-tax contributions, however, have already had tax applied to them. This means they won’t be taxed again when you contribute to your super fund.

It’s worth mentioning that the government’s co-contribution isn’t subject to tax when it’s put into your super. It's also not treated as income when you lodge your tax return.

What's the deadline for making a voluntary contribution?

To receive the government co-contribution, your voluntary contributions need to be in your super before 30 June 2024.

But if you miss the deadline this time around, fear not! The scheme is a long-running one (it was introduced all the way back in 2003) and you can still make voluntary contributions in the next financial year. However, you won't be able to receive your co-contribution until that financial year comes to an end.

Just note that the income thresholds change each year in line with Average Weekly Ordinary Time Earnings (AWOTE).

How to take advantage of the scheme

You don’t need to apply to access the scheme. The government will determine your eligibility when you lodge your 2023-24 tax return. They'll then pay your co-contribution directly to your super fund, as long as your super provider has your TFN.

But, there are a few steps to take to receive a co-contribution:

1. Review your eligibility. You can visit the Australian Taxation Office (ATO) website for the most up-to-date eligibility criteria, including income thresholds for the relevant financial year
2. Check your super. You’ll need to ensure your super provider accepts co-contributions and that they have your TFN on file
3. Decide your contribution amount. Figure out how much you want to contribute to your super. It doesn’t have to be a lump sum payment; you can make ongoing payments throughout the financial year and the government will calculate your total contributions
4. Make your contribution. Reach out to your super provider, or check your online account, to find out how to make voluntary contributions to your super
5. Report your contribution. Include any voluntary contributions in your tax return for that financial year. Once your tax return is lodged, the government will assess your eligibility for the co-contribution scheme
6. Receive your co-contribution. The government typically pays out co-contributions between November and January for any contributions made in the last financial year

Need help exploring the scheme further? Don’t hesitate to reach out to a tax accountant who can help you navigate its ins and outs.