The co-contribution scheme is a government initiative designed to help low and middle-income earners boost their superannuation savings. When eligible individuals make personal after-tax contributions to their super, the government adds an extra contribution up to a set maximum. This provides an incentive to save more for retirement while improving long-term financial security.
The scheme is income-tested, meaning the amount of co-contribution reduces as income increases. For those who qualify, it can be a valuable way to accelerate super growth without extra cost.
Advanced
From a technical perspective, the government co-contribution is available to individuals earning below a set threshold (currently $58,445 in 2023–24). The maximum co-contribution is $500, which applies when a person earns $43,445 or less and contributes at least $1,000 of their own after-tax money.
The co-contribution phases out gradually as income rises and is not available once the upper threshold is exceeded. Eligibility also requires that at least 10% of total income comes from employment or business activities, the individual is under 71 at the end of the financial year, and they have a total superannuation balance under the relevant limit (currently $1.9 million).
Relevance
- Encourages low and middle-income earners to save for retirement
- Provides a direct boost to superannuation balances
- Supports long-term retirement income adequacy
Applications
- Making a $1,000 after-tax super contribution to receive the maximum $500 co-contribution
- Using co-contributions as part of annual retirement savings strategies
- Boosting retirement savings for younger workers or part-time employees
- Taking advantage of the scheme before reaching balance thresholds
Metrics
- Maximum co-contribution entitlement ($500)
- Income thresholds for eligibility
- Total number of eligible participants claiming co-contributions
- Growth in super balances from government contributions
Issues
- Limited to lower-income earners, so benefits reduce quickly as income rises
- Caps mean the scheme cannot significantly increase super balances on its own
- Lack of awareness may lead eligible individuals to miss out
- Requires proactive personal contributions to trigger benefits
Example
A part-time worker earning $40,000 contributes $1,000 of after-tax income to their super. Under the scheme, the government pays an additional $500 directly into their fund, increasing their retirement savings without extra cost.
