Take Advantage of the Government Rebate

Article supplied by The SMSF Club

Since the 1st of July 2012, the government introduced new laws for low income earners, which made superannuation even more attractive as a vehicle to accumulate assets.

For Australians who earn up to $37,000 per annum, the Government now makes an additional contribution into their super fund. The payment is 15% of the eligible concessional contributions (including employer contributions) made up to $500. This effectively reduces the contribution tax for those eligible Australians to zero. It means that all employer contributions are tax free if you are in this income bracket.

We recommend that you sit down with your head coach or book an appointment with one of our super specialists, to see how you can take advantage of these changes.

Below is an example of how this rebate could work for you. Always seek professional advice before making any decisions about your superannuation, and consider your personal and financial circumstances.


Sophie earns $35,000 per annum working as a receptionist.

Sophie’s employer is required to make contributions into her nominated superannuation fund.

This amount is currently 9% of Sophie’s salary, equating to approximately $3,150 per annum. As Sophie’s income is below $300,000, a flat 15% contributions tax rate applies. That is, $472.50 will be paid in tax on her contribution this year. As Sophie’s income is less than $37,000, she is now eligible to receive the low income superannuation contribution (LISC).

The Government will make a contribution of 15% of the $3,150, which equals $472.50, back into Sophie’s Superfund – thereby rebating the entire tax paid on her employer contributions. When we add back this government contribution, the effective contributions tax rate is zero.

Whilst superannuation contributions are taxed, now with the low income superannuation contribution scheme, the tax rate is either equal to, or a lot lower than the marginal income tax rate for all Australians.

Why does the government provide so many tax benefits for Australians to invest within super?

We would all like to think that the tax incentives provided within super are a gift provided by the Government, in recognition for all the hard work and personal contributions made to the growth of the economy. However, in reality there is a bigger picture.

As baby boomers fast approach retirement, the Government will either have to pay this aging population the pension to fund their lifestyle in retirement – the financial consequences of which would be dire – or provide as many incentives as possible now, to ensure that people accumulate sufficient assets to be financially independent in retirement.

For more information about the tax rebate, or any other queries you may have, book an appointment with one of our Super Specialists.

If you would like to learn more about Self Managed Super Funds, register now for the next SMSF Education Evening, hosted by Justin Beeton, Founder and Managing Director of The SMSF Club.

Locations include Adelaide, Perth, Melbourne, Brisbane and Sydney.


Disclaimer: while due care is taken, the viewpoints expressed by contributors and/or sponsosrs do not necessarily reflect the opinions of Your Investment Property.

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