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Making super contributions over the age of 67

As retirement approaches, most of us will want to start contributing more into our super.

Assuming you’re still working, you are free to make personal or non-concessional contributions. See our blog here for more information on making these contributions.

However, once you hit 67, this becomes a little more difficult thanks to what is known as the work test. This change is quite recent, up until 30th June 2020 the work test applied from age 65.

What is the work test?

Also known as the superannuation work test, the work test means you need to prove you are still working (gainfully employed is the terminology used by the super funds) in order for your super fund to accept any personal or non-concessional contributions after you turn 67.

To meet the requirements of the work test, you‘ll need to be working for at least 40 hours over a consecutive 30 day period during the financial year you wish to make the super contributions. This can be over any period during the financial year and is a minimum requirement, there is no maximum requirement so you can continue working full time if you wish.

It’s important to note that ‘gainfully employed’ is defined as employed, self-employed and getting paid for it. This can be within any field but does need to be fully documented and declared for income tax purposes.

What doesn’t pass the work test?

Income from investments or rental properties do not represent ‘gainful employment’. Domestic arrangements such as babysitting or home maintenance for family also don’t apply, even if these are paid services.

This applies only until age 74.

How do I apply for the work test?

You can obtain a work test declaration from your super fund. You’ll need to complete and return the form which requires no evidence however, you should note that the ATO may look at your case and ask for evidence at another time. Make sure you keep evidence such as payslips, timesheets etc.

You’ll need to submit a form for each year you wish to keep contributing to your super.

It’s worth checking with your super fund before you start thinking about your contributions, some funds have different rules around when and how you can contribute.

Work test exemption

In order to allow more time for retirees to maximise their super, an exemption is available for the first income year after you retire.

If you’re aged over 67 (but under 75), you can make voluntary super contributions for one year after you have retired. To qualify, you must have:

  • Met the requirements for the work test in the previous year
  • Have a super balance of less than $300,000
  • Not previously used the work test exemption

How much can I contribute?

For both the work test and the work test exemption, you can contribute as much as the contribution caps allow. For 2020/2021 this means $25,000 for concessional (before tax) contributions and $100,000 for non-concessional (after tax) contributions.

You may also be able take advantage of the bring forward rule. This means you can make a non-concessional contribution of up to three times the normal annual contribution cap of $100,000 (for 2020/2021). So you could contribute up to $300,000.

Contact us if you would like more information or guidance on saving for your retirement.

 

It is very important that you understand that whether the above information is appropriate or not will depend on what your personal circumstances are. Please consider getting professional advice to ensure that any action you take will meet with your objectives, goals, and financial situation.

Disclaimer: Due to the ever-changing landscape of the Australian financial and taxation system, please seek out advice from a professional before taking this advice into consideration. The above information is general in nature and should not be considered as advice.

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