Making super contributions after 67 years of age
Reaching age 67 is now one of life’s big milestones, as that’s when most Aussies will become eligible for the Age Pension. But unfortunately, when it comes to the super system, it’s also the age when the super contribution rules start to tighten up.
Once you hit 67, putting extra money into your super account becomes more difficult as you need to prove you are gainfully employed, which means satisfying the superannuation work test.
Unfortunately, the super work test and the work test exemption can be a little tricky to understand, so here’s a simple guide to the key points.
From 1 July 2020, if you’re aged under 67 you can make personal or non-concessional contributions into your super account without needing to meet a work test requirement.
Once you reach the age of 67 years you will still be required to meet the work test or use the one-off work test exemption.
What is the superannuation work test (and the work test exemption)?
The key thing to understand about making contributions into your super account if you’re aged 67 to 74 is that you also need to be gainfully employed before your super fund will accept your contributions. This is referred to as the superannuation work test.
If you can’t meet the conditions of the work test, from 1 July 2019 there is a one-off work test exemption applying to recent retirees. This work test exemption allows recent retirees to make super contributions if their total superannuation balance (TSB) is less than $300,000 (Read more on this here).
What are the super work test rules?
The key to the super work test is that once you turn 67, you must be able to prove you are gainfully employed before your super fund will accept your super contributions.
Gainfully employed is defined as working at least 40 hours in a period of 30 consecutive days during the financial year in which you wish to make super contributions. The 40 hours can be in any arrangement over the 30 consecutive days (for example, 9am to 5pm over four days, or a few hours each week).
The 30 consecutive days can be at any time during the financial year in which you want to make a voluntary super contribution, so they don’t have to be all in the same calendar month. The 40 hours amount is the minimum requirement you need to meet and there is no maximum limit on how many hours you can work.
Three types of super contributions without the work test requirement
There are three types of superannuation contributions that can be made once a person reaches 67 years without the requirement to meet the work test. They are:
- the superannuation home downsizer contribution
- ceasing work contribution
- employer contributions made for superannuation guarantee, or as required as part of an industrial award
Home downsizer contributions can be made after the sale of a person’s main residence which has been owned for at least 10 years. The person must be 65 or older and a contribution of up to $300,000 can be made within 90-days of the property settlement. The person’s spouse may also be eligible to contribute up to $300,000 if they are 65 or older. There is no upper age limit.
Ceasing work contributions are permitted on a once-only basis after the super fund member has reached 67, in the year after they have ceased work. These rules allow a person to make both concessional and non-concessional contributions providing they have a total super balance of less than $300,000 on June 30 in the previous year. These contributions can be accepted up to 75 years of age.
Regardless of how old an employee is, there are no work tests or age limits for compulsory employer contributions for those aged over 65. Obligatory employer contributions include super guarantee contributions or those made under an industrial award. However, a work test must still be met if the employee wishes to make a salary sacrifice to super between 67 years of age and 75.
After that time, no further salary sacrifice contributions can be made to super.
Note that if your combined super and account-based pension is valued at greater than $1.6 Million at 1 July 2020 regardless of your age, you will be ineligible to make after tax non-concessional contributions with the exception of the home downsizer contribution.
This table summarises whether or not your super fund can accept different types of super contributions at various ages:
Note: Your employer is not required to make SG contributions if you are aged 75 or over.
Over 75? Making personal super contributions
However, once you reach age 75, you can’t make non-concessional personal contributions, even if you satisfy the work test or work test exemption.
There is one exception to this rule. If you are turning 75 during a financial year, you can make a non-concessional contribution on or before the day that is 28 days after the end of the month in which you turn 75. However, you still need to pass the work test and your Total Super Balance (TSB) must not exceed $1.6 million.
To read more on this, visit Contributing to your super in your late 60s: What are the rules?
Also visit all of our source links below for more information, as well as doing your own research and speaking to a finance or superannuation specialist before making any financial or downsizing decisions.
Source:
– The Work Test: Adding to super after 67. Industry SuperFund Read more
– Work test: Making super contributions over 67. SuperGuide. By Janine Mace, 1 July 2020. Read article
– Australian Taxation Office. Age restrictions on contributions. Read article
– Australian Taxation Office. Change to age limits on super contributions. Read article
– AMP Financial Planning, WealthPartners Financial Solutions. By Andrew Heaven – Visit website
– AMP. Super contribution rules when you’re 65 or over. Read article
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