Q. I am 66 years old working part time earning $32,000. As I am over 65, can I make a contribution to Superannuation? Will I qualify for the Government Co-Contribution?
A To be eligible to make a contribution to Superannuation over age 65 you need to satisfy the work test. The work test requires that, you have completed 40 hours work over a 30 consecutive day period in the financial year that the contribution is made. The work test must be met before a contribution can be made.
As long as you continue to meet the work test, your employer can contribute on your behalf under a Salary Sacrifice arrangement up until age 75. As you are over 60, the maximum employer contribution that can be made this year is $35,000 before the super tax concessions no longer apply. This same limit also applies if you are self-employed and eligible to claim a personal tax deduction for your super contributions.
Similarly, personal after-tax contributions can be made up to age 75, subject to the work test. Broadly, as you are over 65, contributions to Superannuation that can be accepted by a fund are limited to $180,000 a year where a tax deduction is not being claimed.
The Government Superannuation Co-Contribution is a co-payment from the government to a superannuation fund when an eligible member makes a personal after tax contribution.
To be eligible to receive the co-payment, you need to be under age 71 at the end of the financial year a contribution is made, you need to lodge a tax return, and receive at least 10% of your income from employment or self-employment. Payments are also restricted to Permanent residents or Australian citizens.
If your total income (incl Fringe Benefits and certain employer superannuation contributions, less allowable business deductions if you are self-employed) is $34,488 (2014/15 financial year) or less, the co-contribution will be 50% of the contribution you make up to a maximum co-payment of $500.
The co-payment tapers to zero when your income reaches $49,488 (2014/15 financial year).
Based on the details provided, in your situation, if you contributed at least $1,000 before 30 June 2015, you would be entitled to receive the full co-payment of $500.
The payment would be made by the ATO to your Superannuation fund following the lodgement of your tax return.
With bank interest rates falling and mounting pressure to generate income from your retirement savings, the Government Superannuation Co-Contribution provides a substantial benefit of up to $500 for those who qualify. Not a bad return for the investment of $1,000!