On 2 October 2018, the Government has released draft legislation to give eligible older Australians additional flexibility to contribute more into superannuation as they move into retirement – as announced in the 2018-19 Budget as part of the More Choices for a Longer Life package.
Currently, there is a ‘work test’ hurdle, which is that individuals aged 65-74 must work at least 40 hours, in any 30-day period, in the financial year, in which the contributions are made.
Under the Government’s draft legislation, Australians aged 65 to 74, with a total superannuation balance below $300,000, will be able to make voluntary contributions, for 12 months, from the end of the financial year, in which they last met the ‘work test’. This would be by amending SIS Reg 7.04, principally by inserting a new SubReg (1A).
- The member’s total superannuation balance will be assessed for eligibility against the $300,000 threshold at the end of the previous financial year.
- Once eligible, there will be no requirement for individuals to remain below the $300,000 balance cap for the duration of the 12-month period.
Individuals will also be able to access unused concessional cap space to contribute more than $25,000 under existing concessional cap carry forward rules during the 12 months.
Existing annual concessional and non-concessional caps ($25,000 and $100,000 respectively) will continue to apply to contributions made under the work test exemption (but s292-85 of the ITAA 1997 will be changed so that, the 1-year exemption from the work test, has to be ignored when determining eligibility for the 3-year ‘bring-forward’ of non-concessional contributions – it was not the intention to turn the 1 year exemption from the work test, effectively, into a 3-year exemption).
CPD questions (answers available)
- Is the draft legislation to do with giving 65-74 year olds an extra financial year, in which to make contributions, after the financial year in which they ceased to pass the 40 hours per month (full-time) work test?
- Will there be a $300k superannuation balance ‘condition’ for this work test exemption?
- When will that balance condition be measured?
- Do you have to remain under the $300k cap after making the exempted contributions?
- Do the $25k and $100k concessional and non-concessional contribution caps apply to the ‘work test’ exempted contributions?
- Can the work-test exemption be used to ‘bring-forward’ three year’s of non-concessional contributions (ie. 3 x $100k)?