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Saturday, 07 May 2011 11:52

Superannuation and the Co‑contribution Scheme

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One government incentive to increase our retirement savings is the super co-contribution scheme – the government will contribute $1 for every $1 you personally contribute, up to $1,000. The information below will help you find out if you can use the co‑contribution scheme to boost your retirement savings.

What is the co-contribution scheme?

If your income is less than $31,920, the government will contribute $1 for every dollar you personally contribute, up to a maximum of $1,000. If you earn between $31,920, and $61,920, the government will contribute an adjusted amount.

Who is eligible?

To qualify for the co-contribution you have to meet the following criteria in the financial year:

• receive an assessable income of less than $61,920;

• make a personal contribution to your superannuation account out of your after-tax income;

• receive 10 per cent or more of your total income from employment or carrying on a business or attributable to activities that result in the person being treated as an "employee" for superannuation guarantee purposes, or a combination of both;

• lodge an income tax return; and

•be less than 71 years of age at the end of the financial year.

Only personal contributions from your after-tax income qualify for a co-contribution. Superannuation payments from your employer and contributions for which a tax deduction has already been claimed (for example under a salary sacrifice arrangement or if you are self-employed) are not eligible.

What are the current levels of co-contribution payable?

The maximum co-contribution that will be made by the government is $1,000, and is available if you have an assessable income of less than $31,920 a year. The maximum co‑contribution is reduced at a rate of 3.33 cents in the dollar if you have an income of between $31,920 and $61,920.

The following table highlights the level of co-contribution the government will make to superannuation, if you make a personal contribution of $1,000.

Income                         Co-contribution

$31,920 or less         $1,000

$35,000                       $897

$40,000                       $731

$45,000                        $564

$50,000                        $397

55,000                            $231

$61,920                          $0

How to apply for the co‑contribution If you qualify for the co-contribution payment, you don’t need to apply. The only actions required from you are to make the extra contribution to your super fund before 30 June and lodge an income tax return. The Australian Taxation Office (ATO) will work out if you are entitled to a co-contribution using information from your tax return and your super fund. If you are eligible, the ATO will then pay the co-contribution directly into your super account where it must remain until you retire. You need to supply your super fund with your tax file number so it will be easier for the ATO to link your personal contribution to your taxable income.

If you feel that you qualify and no payment has been made, you should contact the ATO to find out what has happened.

When will the co-contribution payment be made?

The ATO anticipates that the co-contribution will be paid late in the year. The ATO firstly has to collect information from your super fund about contributions (due 31 October). The ATO also has to wait until you lodge your tax return before they can determine if you are eligible.

Remember you must make your personal super contributions before 30 June to be eligible for a co‑contribution within the current financial year.

The government’s co-contribution scheme is a great incentive to grow your super savings. If your own salary is above the threshold, consider boosting the super of someone in the family who works part time such as your spouse or child. Take full advantage of this scheme if you can.

The co-contribution scheme at a glance

What is it?

The government will make super contributions (up to a maximum of $1,000) for low-income earners who make personal super contributions.

To be eligible you must:

  • receive income of less than $60,342;
  • contribute to super (from post-tax income);
  • receive 10 per cent or more of your total income from employment or carrying on a business;
  • be under 71 years of age; and
  • complete an income tax return.

How much will be paid?

An amount up to $1,000 (if income less than $31,920). An adjusted amount, if income less than $61,920.

When will I receive the money?

Late in the year.

How do I apply?

You don’t need to apply. Make a contribution and the ATO will deposit the co-contribution automatically.

Note: Advice contained in this flyer is general in nature and does not consider your particular situation or needs. Please do not act on this advice until its appropriateness has been determined by a qualified adviser.

For more information about the co-contribution scheme or to arrange a no-cost, no-obligation first consultation, please contact the office on 08 8273 3222.


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Saturday, 07 May 2011 11:29

Save Tax With Dividend Imputation

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Saturday, 07 May 2011 11:22

The Investment Opportunity in Soft Commodities

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Soft Commodities are commodities that are grown not mined, and they include:
• Coarse grains, such as corn, wheat and barley
• Specialty products such as coffee, cocoa, sugar and palm oil
• Proteins such as beef, pork, chicken and fish
• Forestry products

The global soft commodity sector is experiencing a structural change predominately driven by growing demand from the developing world and constrained supply. The important question from an investor’s perspective is: how can I benefit from this trend? The answer we believe, is that superior investment returns can be made from investing in companies that are able to grow volume to meet this demand.

The rising long term demand for soft commodities is being driven by 3 factors:
1. Population Growth – United Nations is forecasting 40% population growth by 2050
2. Rising Living Standards – increasing wealth per capita in emerging economies is resulting in shifting patterns of food consumption and a rise in demand for grain and other soft commodities

At the same time, supply of soft commodities is being constrained by:
1. Falling arable land per person
2. Slowing productivity gains
3. Water – is currently being consumed above its replacement rate
4. Climate Change

Any time where there are large imbalances between supply and demand of commodities, an interesting investment opportunity exists. This is a very difficult theme to play within Australia as the companies exposed to this sector are relatively small by world standards.

There is a comprehensive 8 page paper available from GEM Capital that further explores one way of investing in this sector. If you would like a copy of this report please contact us by either phoning (08) 8273 3222 or via email on This email address is being protected from spambots. You need JavaScript enabled to view it.

Thursday, 14 April 2011 17:10

Maximsing Age Pension

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Wednesday, 13 April 2011 22:44

Advice On Income Protection

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Monday, 11 April 2011 22:15

Political Risks of Investing in Australia are Rising

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July 2011 is shaping up as a pivotal moment for the Frankenstein Government (unrelated parts cobbled together) that has been installed in Australia.  This is when the balance of power in the Senate will shift and the balance of power held by the Greens.

We have seen the Greens attempt at banking reform policy already which must have been taken from a text book from around the same era as their industrial relations policy.

On top of this we have witnessed the debacle surrounding the resources tax, the introduction of the notion of a carbon tax and of course the NBN which is becoming more and more intriguing with every resignation from senior NBN management.

Banking Reforms and the Telstra Bill are other examples of Government intervention over business.  Robert Gottliebson recently wrote an article on how Australian business is being attacked by the Gillard Government which can be found at


Our point here is that the political landscape has changed materially in Australia and 2011 could well see the political risks of investing in Australia rising further.  Business investment thrives on certainty.  With the high Australian Dollar and the uncertainty of the political scene in Australia there are some signs that International investors are putting their money elsewhere rather than investing in Australia.

There are good reasons to have investments spread geographically outside of Australia given the current political environment, not to mention the high Australian Dollar which leads us to our view to invest part of an investment portfolio internationally.  There are some excellent fund managers who are investing in leading global companies that are taking advantage of buoyant economies in emerging companies.  On our website there is an excellent presentation from Magellan Financial Group outlining this in more detail – check it out at



Mark Draper  CFP, Dip FP

Authorised Representative

GEM Capital Financial Advice

Last weekend, Bill Shorten (Assistant to the Treasurer) stated that he does not support the creation of a Sovereign health Fund for Australia.

Firstly I searched on Wikipedia to come up with a definition of a Sovereign Wealth Fund and here is the result:

“A sovereign wealth fund (SWF) is a state-owned investment fund composed of financial assets such as stocks, bonds, property, precious metals or other financial instruments. There are two types of funds: saving funds and stabilization funds. Stabilization
SWFs are created to reduce the volatility of government revenues, to counter the boom-bust cycles' adverse effect on government spending and the national economy. Savings SWFs build up savings for future generations.”
Australia is currently enjoying is highest level of national income for decades courtesy of the mining boom. Some in the Reserve Bank and many leading business people are calling for Australia to establish a Sovereign Wealth Fund to save some of the money that the country is making from its resources boom while commodity prices are high and put it aside for the time when the commodity boom subsides.
Put simply the idea of a Sovereign Wealth Fund is putting money aside for a rainy day as the old cliché goes. Instead it seems that the current Government wants to spend additional revenue earned during the boom times and assume that the commodities boom and current income will last forever. I fear that when the resources boom subsides, that Australia will have little to show for it.
What is even more disturbing is that Bill Shorten was quoted as saying that he didn’t think Australia needed a Sovereign Wealth Fund as we already have one in the form of Superannuation. With all due respect, Bill’s statement here is rubbish. Last time I looked at my superannuation statement I didn’t see any reference to my savings being used to reduce the volatility of government revenue.
While clearly criticising the ALP’s view on a Sovereign Wealth Fund here, it must be remembered that I also publicly criticised the Coalition’s stance on Banking policy last year. The purpose of this article is to encourage Australian’s to support a sensible and
informed debate on important issues such as the establishment of a Sovereign Wealth Fund rather than tolerate the daily rhetoric of trash that is currently coming from Canberra.
The views in this article are my own personal opinions, produced for the interests of the future well being of Australia and do not reflect the views of the dealer group.
Mark Draper

Friday, 25 March 2011 18:04

Fixed Interest Investors – Wealth Hazard Ahead

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APRA News Article for October 2010 edition

With investment markets uncertain, many investors have sought the fixed interest markets as a safe haven.  While term deposits and cash management trusts can generally be considered safe, particularly with the current Government bank guarantee, this article examines fixed interest investments that are often held in managed funds and allocated pension/superannuation funds that could actually lose money in a rising interest rate environment.

The fixed interest funds we are referring to here are usually called “Fixed Interest” or “Capital Stable” funds and form part of the investment menu of managed funds, allocated pension funds and superannuation funds.

But how can it be that a fixed interest fund can lose value?  The underlying investments of a fixed interest fund typically include long dated Government Bonds.  In Australia the Government currently issues 10 year bonds.  If an investor purchased a Government Bond and held it until it matured in 10 years time, then the investor would receive their capital back at maturity assuming that the Government was not insolvent.  So far, so good.

Fixed Interest funds usually (or should) price their investments daily and it is with this point in mind, that investors in these funds can lose value in a rising interest rate environment.  To highlight this point, consider an investor who purchased a 10 year bond for $100,000 with an interest rate of 5%.  The investor receives $5,000 of interest each year.  Should interest rates move up to 10%, the investor would only require $50,000 of capital to generate the same level of income.  When fixed interest investments are valued daily, it is this logic that is used to determine the current value of a bond.  The principle is simple, fixed interest investments can increase in value when interest rates fall, and can lose value when interest rates rise.

Information sourced from Eurostat, International Monetary Fund and Bloomberg show that forecast annual Government Budget deficits around the world for 2010 – 2012 will be around USD $8 trillion (assuming budget balances are converted into US Dollars using the exchange rate on 12th May 2010).  The IMF has forecast in its Economic Outlook in April 2010 that these deficits are to be financed by a limited pool of savings.  The IMF forecast that the combined global current account surplus positions for 2010 – 2012 are around USD $3.8 trillion.  This means that it is forecast that governments around the world will require $8 trillion of funding over the next 3 years, but the savings pool is forecast to be less than half that.

This can only result in competition for debt from Governments around the world and the simple forces of supply and demand tells us that this can only lead to increases in interest rates.

Linking back to the effect of rising interest rates on fixed interest investments, below is a chart prepared by Magellan Financial Group showing the loss of value of Government Bonds assuming a rise in long term interest rates of 2% and then by 4%.  You will see that the value of an Australian 10 Year Government Bond would drop by 24.9% in the event of long interest rates rising by 4% (light blue bar), and would fall in value by 13.6% if long term rates increased by 2% (mid blue bar).


The message here is clear, Government debt around the world exceeds available savings and is extremely likely to put upward pressure on long term interest rates.  Investors should assess the impact of rising long term interest rates on any fixed interest investments they hold as a matter of urgency.

Author of this article is Mark Draper, from GEM Capital Financial Advice.  Further investment knowledge is available on the GEM Capital website –

For those wanting to complete presentation from Magellan Financial Group about the issue of rising long term interest rates, please either ring (08) 8273 3222 or email your request to This email address is being protected from spambots. You need JavaScript enabled to view it.

Last Friday’s earthquake in Japan has bought massive human misery. It will also have economic consequences for the global economy as well as Australian Companies.
Here is our first pass at identifying some industries and companies that are likely to be impacted in some way (either positively or negatively).

Insurance Companies
Insurance risk modelling group AIR Worldwide estimates that the total insured losses could be up to US$34.5bn excluding tsunami damage. QBE updated the market yesterday with a preliminary estimate that claims from the earthquake and tsunami would be around US$125 million, which is not financially significant to QBE. Other Australian insurers are not likely to have any exposure to this event.

Uranium Miners
The market is questioning the future strategy of nuclear energy following the threat of meltdown of several nuclear reactors. We have no exposure to uranium miners at GEM Capital and do not recommend pursuing this area.

Australian Inbound Tourism
Japanese and New Zealand tourists make up a large volume of inbound tourism to Australia. Listed companies that could be negatively impacted by earthquakes in both countries include Tabcorp (hotels and casino’s), Qantas and Virgin Blue. GEM Capital has very little exposure both directly and via managed funds to these sectors.

Japanese Property Groups
GEM Capital has no exposure to listed Japanese Property Companies which include Astro Japan Property Group and Galileo Japan Trust. In any case, both of these companies have stated that their properties were not significantly impacted.

Potential Beneficiaries
Australia’s coal industry and Liquefied Natural Gas producers could be a beneficiary if increased demand for these sources of energy over nuclear eventuates. Coal industry could suffer from a proposed carbon tax. Origin Energy has exposure to energy and in particular LNG.
Suppliers of construction materials, such as steel and concrete. This is likely to be short term in nature though.
We will provide a further update of this information on our website as we develop our thoughts and gather additional information, particularly to do with the banking system.
At this stage however we stress that this event does not alter our fundamental view of investments as it is likely that most of the impacts from an investment perspective (rather than human perspective) will be at the margin.
I trust that you have found this information useful.

Kind Regards
Mark Draper CFP, Dip FP
Authorised Representative