As an Australian, you are eligible to make super contributions up to the age of 74. These contributions can either be non-concessional (after-tax) contributions, such as personal contributions or they can be concessional (before-tax) contributions, such as super guarantee contributions or salary sacrificed superannuation contributions.
Here are some tips to help you understand the super rules if you are 65 or over.
1. Work test
If you are over the age of 65 and plan to make a personal contribution to your fund, you must satisfy the work test.The work test requires that you work a minimum of 40 hours in a period of no more than 30 consecutive days.Note, are accepted at any time, regardless of age.
2. Contributions if you’re 75 and over
If you’re aged 75 and over you cannot make non-concessional (after-tax) contributions to your super fund, if you are still working and are eligible, your employer can still contribute super guarantee payments.
3. Tax-deductible contributions
If you plan to make a tax deduction for concessional super contributions that you’ve made you need taxable income such as employment income, business income, or net rental income as you will need to justify the tax deduction.
4. You must be gainfully employed
When completing the work test, to be eligible to make super contributions if you’re over 65, you will be asked if you have been “gainfully employed”.To be gainfully employed means to be employed or self-employed for gain or reward in any business, trade, profession, occupation or employment.It is a condition of this test you satisfy the conditions of the work test before making a non-concessional super contribution. The tax consequences can be grave if you are found to fail this test.
5. Work test involves getting paid
The work test can be satisfied when the “employment” you are involved with is paying you for your efforts.This can include but is not limited to farming, babysitting, cleaning, lawn mowing etc.
6. Volunteer work
If you are volunteering and are over the age of 65 those hours spent volunteering, unfortunately, does not count towards the 40-hour work test.
7. Work test is satisfied in a financial year
For each financial year you plan to make a non-concessional contribution, you must complete the work test in that financial year if you are 65 of age or over.
8. Document all employment
To protect yourself and to avoid any tax complications make sure that all hours you have worked are fully documented and declared for tax purposes, including all income you have received.
9. Bring forward rule
If you are 65 years of age or over you cannot take advantage of the bring-forward rule when making non-concessional (after-tax) contributions.Therefore you are only eligible to contribute the maximum for that cap.
You should plan ahead if you do wish to take advantage of the rule. Ideally, you would use this rule just prior to your 65th birthday.
What is the work test?
If you are over the age of 65 and younger than 75, the work test requires you to have worked at least 40 hours within 30 consecutive days in a financial year before your super fund can accept contributions for you.
This includes non-mandated employer contributions, personal contributions, spouse contributions and government co-contributions. This is known as the work test.
LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you. Anthony Stedman and Adam Watts both hold specialist accreditations with SPAA as specialist Self-Managed Superannuation planners.
Would you like to discuss your personal position further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733.
There is no cost or obligation for our initial conversation/meeting.
Written by Nicole Christie of LifeTime Financial Group. A leading privately owned Melbourne based Financial Planning practice