My long time followers know that I try to under promise and over deliver. However, in this hyped up world of crypto advertising, where Instagram influencers and Tic Toc dancers are giving out free financial advice, I thought it appropriate to do a little song and dance myself about this guaranteed, tax free scheme that gives you a 50% guaranteed return on investment. Free money – get on board!
Low income earners have two government programs available that incentivise super contributions. They are the Government Co-Contribution, and the Spouse Contribution tax rebate.
The first one, the Co-Contribution is an additional $500 that is transferred into your super, from the ATO, when you transfer $1,000 of your own money into super. Legitimately, this is a 50% tax paid return on your investment, and it will compound to be worth a lot more over time. Yes, there are catches, so you need to read the fine print, but whenever I can find a 50% guaranteed return for investors, believe me, I get excited.
The second is the Spouse Contribution Offset. In this, the return is a bit lower, effectively 18% return on investment. By contributing $3,000 into the super account of your spouse, you can get the benefit of a $540 tax offset.
OK, so here is the fine print.
To get the maximum Co-Contribution you must contribute $1,000 to your superfund, not claim a tax deduction on that, and be under age 71 at 30 June. You must also have assessable income from either employment or a business that is at least 10% of your total assessable income. And finally, your total income must be below $39,837 to get the full $500 rebate. Above that the rebate phases out such that once your adjusted taxable income is above $54,837 the Co-Contribution drops to zero. You also need to lodge a tax return for the year. Once the tax return is lodged, the ATO send the $500 direct to your superfund. (for more on the definition of Adjusted Taxable Income, see this link at the ATO)
The Spouse Contribution provides a tax offset (which boosts your tax refund) of up to $540. To get this, you need to make a super contribution into your spouse’s Super account, and correctly identify it as a ‘spouse contribution’. You can get some tax offset on lesser contributions, but to get the maximum $540 offset you need to contribute $3,000. As long as your spouse has taxable income of less than $37,000 you will get the maximum tax offset.
That’s it. No crypto advice, no blue sky mining, just a couple of little tips to make the most out of tax time for low income earners. Please contact us if you need more help with end of year tax planning.
