SMSF Co-Contribution

SMSF holders who have been taking advantage of the Commonwealth Government’s super co-contributions scheme may have to reassess their strategy following the changes announced recently.

From 1 July 2012 the maximum matching amount will drop from $1.00 to 50c.  This cuts the the maximum co-contribution in half from $1,000 to $500.

Because of the sliding scale that co-contributions work on, this also means that the maximum income for SMSF holders to benefit from will come down dramatically from $61,920 to $46,920.

The new co-contribution will be a far cry from the $1.50 maximum benefit that was available before the previous reduction to $1.00 back in 2009.  The reason for the reduction has primarily been to save the government money in their quest to return the budget to surplus.

It certainly seems like a backwards idea to continue to take away the incentive for people on low and middle income to contribute to their super.  After all, people with insufficient retirement savings are going to cost the government even more in pension costs when they run out of super.

Admittedly these recent changes probably won’t have much or any impact on the average working SMSF holder who typically has an above average income, but there are still plenty of people who for various reasons will hold an SMSF without necessarily taking home a huge salary.

If you have been taking advantage of the super co-contribution to bolster your SMSF balance, we recommend that you review your strategy or speak with a qualified financial adviser or accountant to see how the changes will affect you.

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