January 2019 – Superannuation Co-contributions and the First Home Super Saver Scheme

Would you like to give a gift for yourself or your children that will automatically increase in value by up to fifty per cent? Or perhaps you might like to assist your children with their first home deposit.

Something that is not well known by most SMSF members is the government superannuation co-contribution.  This is where the government will match up to fifty per cent of a member’s contribution made into their superannuation fund.  The maximum that will be matched is $1000 of non-concessional contributions.  This means, if a member deposits $1000 of non-concessional contributions into their superannuation fund, it may increase in value by $500.

How good is that.  $1000 automatically turning into $1500.  I cannot think of any investment where your money is guaranteed to increase by $500.  

To qualify for the government co-contribution, the member must receive at least ten per cent of their total income from their employment or from running a business.  If their total income is less than $37,697, then they will be entitled to the entire fifty per cent.  If, however, their income is between $37,697 and $52,697, then the government co-contribution is reduced by 0.0333 cents for every dollar above the lower income threshold of $37,697.

Example 1:  Assume David’s income is $36,000 and he made non-concessional contributions of $1000.  This member will receive government co-contributions of $500 as his income is below the lower income threshold.

Example 2:  Assume Jenny’s income is $39,000 and she made non-concessional contributions of $1000.  As her income is above $37,697, the government co-contribution will decrease by 0.0333 cents for every dollar above the lower income threshold (i.e. $39,000 – $37,697 = $1,303 x 0.0333 = $43).  This means Jenny will be entitled to government co-contributions of $457 (i.e. $500 – $43 = $457).

The January holiday period may also be a good time for families to get together and spend time looking around for a new home to buy.  Real estate agents are always happy for new buyers over the slower January month.

So, if your child doesn’t qualify for the government co-contribution and is eighteen or older, they can use the non-concessional contribution toward their first home under the First Home Super Saver Scheme (FHSSS).  Okay, $1000 may not be much but every dollar counts. The beauty about putting your gift into super is that the earnings will be taxed concessionally.  Both the contribution and its earnings can be used towards FHSSS. Unfortunately, contributions that qualify for the government co-contribution and the co-contribution itself cannot be used for FHSSS.

Every cent of personal non-concessional contributions can be withdrawn, along with their other superannuation savings of up to $15,000 per year, up to a lifetime maximum limit of $30,000.  The money withdrawn can be used either to purchase or construct a first home.  To qualify, the member will need to enter into a contract within twelve months of the money being withdrawn and also must intend to live in the home as soon as practicable for at least six months of the first twelve months the home is available.   

So, if you are stuck for what to do with your cash Christmas gifts, or what gift to give your children on their next birthday, why not give your kids something that will increase in value or might assist them in getting their first home.  It may well be the gift that keeps on giving well after Christmas and birthdays have become distant memories.


Monica Rule is an SMSF specialist and author.  Her advice in general in nature and you should seek advice that relates to your specific circumstances before making any decisions.