We’ve just waved goodbye to the first week of June, which means you have about two weeks to make two financial moves that could net you a free $500 in your super or a $540 discount on your tax. Or both.
I’m talking about big opportunities for lower earners, one called the super co-contribution and the other, for those who have one, the spouse contribution.
Both require you to pay money but the payback for doing so is significant. Let’s start with the giveaway requiring the least money: the super co-contribution. This is a free up to $500 paid into your super from the federal government.
The two triggers to receive it are a $1000 after-tax contribution and an income of less than $62,488. You get the full $500 if your income is below $47,488, after which it phases down until it disappears at $62,488 (in the 2025-26 tax year).
You also need to be working in some capacity to qualify for this one: 10 per cent or more of your income must come from employment (full-time, part-time or casual) or helping run a business (self-employment or contracting with an ABN).
And note the payment has to come from you – I’ve had many people ask me why the government top-up never landed in their account and usually, it’s because a spouse or family member has paid the money in on their behalf.
Act now to take advantage of the generous super freebies this year … and, from now on, plan to do it every possible year.
But yes, make it right and the co-contribution is paid automatically after the end of the tax year.
Which brings us to the spouse contribution. This is again for an after-tax contribution, but here you get a benefit for paying in as much as $3000. Let’s not miss, either, that you get to keep extra super contributions – and over time they can dramatically swell your super.
It’s also possible that your family can take advantage of both the co-contribution and a spouse contribution, giving your ‘fun fund’ a double boost. But I’ll come back to that.
A full $3000 contribution for a spouse earning less than $37,000 will net the payer a $540 tax offset. This is a big saving because it’s not a tax deduction but a tax discount. The offset phases down from $540 to zero by the time income hits $40,000.
There are just two final eligibility requirements for both spouse and co-contribution super perks, possibly not difficult ones.
Firstly, you – or your spouse in the case of the spouse contribution – must have had a super balance of less than $2 million on June 30 of the previous tax year (what’s called the general transfer balance cap).
Secondly, you – or your spouse – must not have exceeded the non-concessional (after tax) contributions limit for the year. That’s $120,000 this year and $130,000 next.
And for families, particularly when one person is doing less paid work (maybe to work harder looking after kids at home!), the benefits of both schemes together could be huge.
It’s women who still, more often than not, take the time off from paid work, and the Super Members Council says that by their early 60s, the median super balance for a female is about $51,000 lower than it is for men (the detriment is compounded by the gender pay gap).
While paid parental leave now attracts super, this is only on a payment at the minimum wage (from July 1, for two weeks longer at 26 weeks) and so not going to make a massive difference.
But the two super boosters annually can help greatly. Overall, the annual top-up is $1500 from the total super contribution and co-contribution and $3000 in spouse contributions, plus an immediate $540 family tax windfall.
Remember, to avail yourself of both super strategies, you need to still be earning (that 10 per cent rule) and have an income under $40,000. Meanwhile, July 1 marks a change that will also help protect and build super – for everyone.
Payday super means you will finally get your super entitlement as you earn it. Currently, employers have three months to remit, and it’s too easy not to do it (call the ATO’s reporting line on 13 10 20 if your employer has paid you insufficient super or paid it late, or use the online tool).
So, with that being automated from the beginning of next tax year, why not put plans in place to make sure you get the co- and spouse contributions next year, too.
Automate a regular savings plan – spread across 52 weeks, you would have the $1000 needed to get the free $500 co-contribution with regular savings of just $19.25 a week.
And even amassing the $3000 for the full spouse contribution and the $540 tax offset would only take $58 a week. Note too, that you don’t have to pay in those whole amounts – you’ll get the giveaway or tax break on however much you can manage up to the maximum.
The income thresholds for the co-contribution are also indexed so that the bottom next year will be $49,293 (for the full $500) and the top (where the payment cuts out), $64,293.
If you can, act now to take advantage of the generous super freebies this year … and, from now on, plan to do it every possible year.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at nicolessmartmoney.com. Follow her on Facebook, X and Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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