Episode 44.2 - Money for Jam part 2 - Free money from the government
Part 2 of our miniseries goes back to look at how you can get free money from the government by way of the co-contribution. There aren’t many of these opportunities around so make the most of while you can! Have a listen!
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Alex Hont 0:17
Welcome to the masters of finance podcast, we've got a little mini series coming up for you over the holidays we're going to call money for jam, where we go through a few ideas of how you can get money for really not doing very much. In part two of the money for jam series, we're going to have a look at the government co contribution. I know we've covered it before, but we're gonna have a little bit more of an in depth look and look at the numbers. Have a listen.
Chris Haggart 0:39
Chris Haggart and Alex Hont, are authorized representatives of Moran Partners Financial Planning. Any opinions expressed in this podcast are solely our own and do not reflect the opinions or views of Moran Partners Financial Planning or any entity we are associated with. This podcast is for informational purposes only and should not be used for or does not constitute investment advice.
Alex Hont 0:59
All right Chris. We're back.
Chris Haggart 1:01
Alex Hont 1:01
Money for jam. You got your jam jars?
Chris Haggart 1:06
I can't remember the last time I ate jam
Alex Hont 1:08
Really? I love it on a croissant. Plain croissant with jam. Strawberry, raspberry, they're my favorites.
Chris Haggart 1:13
What's that really tall bottle that you can buy in the supermarket? It's like fancy, it's like blackberry. That's my my favorite jam in the world but I just never eat it. I just don't, jams are not the go to. Vegemite or peanut butter.
Alex Hont 1:25
Yeah, they're great but also they're not sweet and feel like dessert.
Chris Haggart 1:30
Although scones actually probably had some jam recently.
Alex Hont 1:33
A scones not a scone without jam and cream.
Chris Haggart 1:35
My mom loves making scones. So
Alex Hont 1:37
That's that's what this series was about wasn't it? Jam?
Chris Haggart 1:39
Jam, yeah definitely. Let's talk more about jam. No money for jam.
Alex Hont 1:43
We could keep going all day, all day. Okay, Chris. Here we are part two of our money for jam, which we talked about last time was a very quick and easy way to get to earn money with little or no effort.
Chris Haggart 1:55
We've talked about this in a recent podcast and it is what legitimately is the easiest way to get
Alex Hont 2:02
To actually get $500? Yeah. Potentially if you qualify.
Chris Haggart 2:06
Alex Hont 2:07
Free money. Yep. So this is where, of course talking about the government co contribution. Yep. So let's lead off with, you know, what's the benefit? Why why would you do it?
Chris Haggart 2:16
Alex Hont 2:17
Free money? So basically, last time we talked about the spouse contribution, which is putting money into someone else's super account, this ones putting money $1,000 in your super account, right? And
Chris Haggart 2:31
Government, it's going to give you a 50% return.
Alex Hont 2:33
50% return. $500 goes into your super account when you do this. Now, of course in order to qualify, what are we what are some of the qualifying characteristics? Let's start with the income tests.
Chris Haggart 2:46
Yep. So as with a lot of these government initiatives, it's a the whole design of the legislation is to help low to middle income earners increase their superannuation balance, which in the future, they would hope would reduce reliance on the Social Security system. So if you earn less than $38,564 for the 2019/20 financial year and you contribute $1,000 to your super fund after tax
Alex Hont 3:14
That's right non concessional contribution or after tax contribution,
Chris Haggart 3:16
You will get the full 500.
Alex Hont 3:18
So less than say that what's that number again?
Chris Haggart 3:21
Alex Hont 3:23
So less than 38 and a half thousand 564. Yes, you get the full one. Okay, what about if my income's a bit higher than that?
Chris Haggart 3:30
So if your income stretches up to $53,564
Alex Hont 3:38
Chris Haggart 3:39
That's the last piece of income before it cuts out.
Alex Hont 3:43
Yep. Okay. So if my income's between 38,564 and 53,564, I will get some, but not the full 500 and it scales down as my income gets higher.
Chris Haggart 3:55
Alex Hont 3:55
and then of course, above $53,564 of income.
Chris Haggart 4:00
Sorry, you earn too much.
Alex Hont 4:01
You get nothing for making that contribution other than the satisfaction that I'm building my super balance.
Chris Haggart 4:05
Yeah, well, this is the thing. So the thousand dollars goes in. That's that's a good thing. I think because you're building, you're building the balance of the superannuation fund. So there's, there's, it's two, two faceted. In that sense, it doesn't mean that just because you don't get the contribution, you shouldn't make the contribution.
Alex Hont 4:21
That's true. There's a couple of other qualifying character, or sorry, there's a second income test, right? And that really just says that, that you have to have had taxable income in a year and at least 10% of it or more needs to come from actually working.
Chris Haggart 4:36
So you can't be just
Alex Hont 4:38
getting dividends and then and or distributions and then say, you know, putting the money in so you actually have had to have worked and earned more than 10% of your income from employment or carrying on a business or a combination of both. The other tests that we've got to pass to be able to claim this contribution or claim the the co-contribution. You must be less than 71 years old, you must lodge your tax return. Yeah. And really, you must have a super balance of less than 1.6 million.
Chris Haggart 5:04
Yeah. So under the transfer balance cap.
Alex Hont 5:12
That's right. And look, that's, of course not exceeded their the concessional contribution cap. Correct. So it's really, as you said, designed for those middle to low income earners. It's great for the non working spouse, if you have a non working spouse. And I've got another just he's we've said 50%, guaranteed return, Chris, I posit to you that you we can get you a higher rate of return if not a higher dollar value.
Chris Haggart 5:39
Alex Hont 5:40
Because if your co-contribution is less than $20, we will pay the minimum amount of $20.
Chris Haggart 5:47
Yeah, wow. So you put 20 bucks in, you get 20 bucks back?
Yeah, that's pretty good.
Alex Hont 5:53
Hundred percent return
Chris Haggart 5:54
in return. That's pretty good.
Alex Hont 5:56
Actually, if you put in $1, you might get 20 bucks back. So that's a
Chris Haggart 6:00
Really, 2,000%return. I'm not real good on that side on maths.
Alex Hont 6:04
We're arguing semantics here because because it's still only 20 bucks but nonetheless.
Chris Haggart 6:08
Well 20 bucks is 20 bucks
Alex Hont 6:10
You know if you want to have an argument about how well how good of an investment you made, you made x amount you know multiple times return.
Chris Haggart 6:17
That's a good BBQ BBQ conversation that one yeah. I made an investment that guaranteed had a 2,000% return.
Alex Hont 6:26
Zero risk, yeah. All right. Now I have one other one one other point on this one that we can get to because last time we talked about the spouse contribution. So you the spouse contribution is by definition, an after tax or non concessional contribution. So if we're putting $3,000 into our spouses super account, and they're going to qualify because the qualification characteristics are broadly the same. They're going to not only do you get the 540 tax offset, they get the $500 non government co-contributions more than more than likely.
Chris Haggart 7:07
That's pretty good. So 3000 in 1, no ,840 back
Alex Hont 7:16
3000 in 1040 benefit, extra benefit 540 plus 500.
Chris Haggart 7:23
Oh, yeah, sorry. See I told you it was very good at maths. It's why we have calculators.
Alex Hont 7:26
Lucky you don't need it for this job.
Chris Haggart 7:28
Exactly right. So we've got computer programs and software for that sort of stuff.
Alex Hont 7:33
That's right. That's, that's, that's perfect for that sort of stuff.
Chris Haggart 7:36
Alex Hont 7:38
Alright, so that's the government co contribution. That's part two of our money for jam series. Stay tuned because we're coming back with the third and final part, which might be a little bit meatier than these first two, but still very valuable.
Thanks for listening to this episode of the masters of finance podcast. If you want to hear it again or hear any of our other episodes, you can find us on iTunes, Stitcher, or Spotify. Or you can also head over to our website at www.moranfp.com.au to find all the episodes and some other material that we have for you. If you want to get in touch with either Chris or I, you can find us on social media or get in contact with us through the website. We hope you enjoyed this episode and look out for the next one coming soon.
Transcribed by https://otter.ai