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Chart: Maximum co-contribution under new and previous policies

Maximum co-contribution under new and previous policies

Note: All people on less than $25,000 per annum can get the maximum co-contribution

Boosting retirement savings

An extension of the Government’s superannuation co-contribution and a reduction in the superannuation surcharge, worth $2.7 billion over four years, will boost incentives to save for retirement. Australians will have more choice in how they retire and fund their retirement.

Over three quarters of the benefit will go to low and middle income earners.

Government superannuation co-contribution

The Government will increase the incentive for low to middle income Australians to make additional voluntary savings through the superannuation system. This measure will cost $2.1 billion over the next four years.

From 2004-05, the maximum Government co-contribution will be increased from $1,000 to $1,500, to match a $1,000 personal contribution. The maximum Government co-contribution of $1,500 will be available to everyone who makes personal contributions with incomes below $28,000. The income threshold was previously $27,500. Above this amount, the maximum co-contribution will reduce by 5 cents for each dollar of income to phase out completely at $58,000. Currently the co-contribution phases out completely at an income of $40,000.

Superannuation surcharge

The Government will further lower the superannuation surcharge rate to 12.5 per cent in 2004-05, 10 per cent in 2005-06 and 7.5 per cent for 2006-07 and following years.

This measure will cost $610 million over the forward estimates period and will further improve the incentives to contribute to superannuation.

Flexibility and choice

With the ageing of the population, the retirement income system needs to be more flexible and adaptable to the changing workplace arrangements and provide more choices. The Government is reducing restrictions on who may contribute to superannuation and improving options for those in the transition to retirement and those in retirement.

Details of changes to the retirement income system are outlined in the statement, A more flexible and adaptable retirement income system, released in February 2004.

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