A TikTok posted on Tuesday has gone viral for highlighting that the Australian Government is offering millions of low and middle income earners up to $500 annually in “free” superannuation contributions — but there’s a catch.
To get the cash boost deposited in their super fund after tax time, eligible Australians will need to fork out their own voluntary contributions.
WATCH THE VIDEO ABOVE: Tiktoker shares superannuation hack to get an extra $500.
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“Why is no one talking about how the government is basically giving away $500 cash for free,” the TikToker said in a video viewed over 300,000 times.
But UniSuper advice team lead Brooke Logan told 7NEWS.com.au: “There’s no such thing as a free lunch (or $500), so there are some strings attached.”
Under the Super Co-contribution Scheme, the Australian government will match each dollar voluntarily contributed to the super fund by 50c, capping the offer at $500, according to the Australian Taxation Office.
That means to get the full annual co-contribution, Australians would need to contribute $1000 themselves, on top of their compulsory wage deductions.
To be eligible for the full $500 payment, Australians must be younger than 71, and earn below the lower income threshold, which for the 2023-24 financial year is $43,445.
“You must earn at least 10 per cent of your income from employment or self-employment,” Logan added.
For anyone earning above that, but below the higher income threshold — which for the 2023-24 financial year is $58,445 — entitlements will reduce progressively as income rises, until it ceases altogether for those earning above the higher threshold.
Australians can work out exactly how much they would be eligible to receive under the scheme using the ATO co-contribution calculator.
The co-contributions, at a 50 per cent match rate, are automatically deposited into the super funds once tax returns confirming eligibility are lodged.
The TikTok prompted a spirited discussion online.
Some pointed out that the co-contributions can be a helpful saving tactic for first homeowners wishing to withdraw contributions before they retire, using the first home super saver (FHSSS) scheme.
But Logan clarified that while “you could potentially release the post-tax contribution (that is, what you put in) under the FHSSS and receive the government co-contribution within your super … the government co-contribution cannot be released under the FHSSS.”
“The funds cannot be accessed until a condition of release has been met, usually that means retirement.”
Others simply slammed the scheme as “out of touch”.
“If I’m earning under 43k I’m not giving extra money to my super, I’d be busy trying to survive,” one person commented.
“Hold on a dang minute, that’s my baked bean fund,” another said. “Can they just put a cap on rent instead?” another said.
“I would if I wasn’t working in childcare and living in community housing,” another said.
Keeping in line with ASIC financial influencer regulations, the TikToker said in a disclaimer that she was not offering financial advice — and Logan explained why any financial suggestion on social media should be considered “general in nature”.
“It will not be suitable for everyone and will depend on your personal circumstances,” Logan said.
“Everyone is different, and there are a lot of ways to think about putting $1000 to work. For example, you might be better off using that $1000 to pay off credit card debt.
“Before making decisions, consider whether this information is appropriate for your circumstances, or even better yet, seek financial advice.”