Government contributions include both the super co-contribution and the low income super contribution (LISC). Both measures are designed to boost the retirement savings of low or middle-income earners.
Subject to eligibility requirements and income thresholds, your fund members will receive a matched super co-contribution from the government of up to $500 annually where they make personal (after-tax) super contributions to their fund or RSA.
The LISC provides a government super contribution of up to $500 annually for members with an adjusted taxable income up to $37,000. The LISC will be 15% of the concessional contributions for the financial year, up to the $500 maximum. Concessional contributions made from 2012–13 will be eligible.
Both amounts are paid directly to you for allocation to members' accounts. These contributions are not subject to tax.
The bill to repeal LISC was passed by parliament on 2 September 2014. This will mean that while LISC will continue to be payable in respect of concessional contributions made up to and including the 2016-17 year, determinations of LISC will cease at 1 July 2019.
What is the process for receiving the LISC?
The process to determine eligibility and calculate the amount of the LISC largely mirrors the co-contributions process. We need the following to occur to calculate the entitlement:
- you receive concessional contributions for your members during the year
- you report the concessional contributions to us on the MCS
- where your members have lodged their tax returns, we use the information on the income tax return to determine eligibility and calculate the LISC
- where a member isn't required to lodge a tax return, we will work out their entitlement 12 months after the end of the relevant financial year using other information we collect.
We expect the majority of LISC payments to be made in the November-to-January period following the end of the previous financial year, although they will be paid during a different week of the month from the co-contributions payments. We will pay you LISC amounts every third Friday of the month.
Once the entitlement has been calculated, we send the payment to you (either by cheque or electronically) together with a RARN. The notice includes the information you need to allocate the money to your members' accounts.
What if you can't accept the contributions?
There may be instances where you cannot accept the co-contribution or LISC – for example, where the individual is no longer a member of your fund, or the account has entered the pension phase. Where you cannot credit the account within 28 days, you must complete a payment variation advice (PVA) providing details of the relevant member accounts and the reasons why the payments cannot be accepted, and return the payment. Interest is payable when the payment is returned outside the 35 days from the date you receive the RARN.
What if you receive an amount greater than $500?
The maximum LISC is $500 for the financial year. You may receive remittances for more than $500 if the payment covers more than one financial year – so don't reject any payments we send you just because the amount is more than $500.
Will LISC be included in the existing RARN file?
The version 4.0.0 of the RARN has been extended to cater for LISC.
It is expected the LISC process will be closely aligned to other current payment and variation processes, such as super guarantee, but will be paid in a separate file type to CRM files.
What about ATO-held money?
Where the amounts are returned to us, we will attempt to send them to another super account for that individual. If we can't find a destination, we will send the member a letter asking them to nominate a fund.
If we receive an MCS with new valid destination account details for an individual, we will send the money to that account. If we can't identify a valid account, we will retain them as ATO-held money for the individual until a destination account can be found.
Any LISC amounts we hold will be displayed on our online services for an individual to find and nominate a new fund to receive the payment.
You need to be aware that you will not be informed of any LISC amounts we hold when you undertake a SuperMatch search. However, LISC amounts will be reported for SuperMatch2 searches.
Do you need to report to your members?
Yes. You are required to report co-contributions and LISC to your members on member statements.
Do you need to report co-contributions and LISC separately?
Yes, you will need to report co-contributions and LISC separately on member statements.