If you’re a recent retiree and looking to increase your superannuation savings, here’s some good news!
The Australian Government is proposing to make it easier for recent retirees to save more super by allowing them to contribute for a year without having to show that they’ve been ‘gainfully employed’.
The former rules
Anyone below 65 can contribute to their super regardless of whether they work or not. But those aged between 65 and 74 need to meet the work test before they can make super contributions. To pass the test, they have to show that they’ve been gainfully employed for at least 40 hours over 30 consecutive days in the financial year they plan to contribute.
The government has already given members with a total super balance of less than $500,000 some flexibility to further grow their super. These individuals can carry forward any unused amount below the concessional contribution cap of $25,000 on a rolling basis for five years starting from 1 July 2018. They can use their unused cap amounts from 1 July 2019. But people between 65 and 74 must still meet the work test before they can make these ‘catch‑up’ contributions.
The new measure
Now, to encourage this age group to save more for retirement, the government is proposing to give individuals who don’t meet the work test an extra year to beef up their super savings. From 1 July 2019, those aged between 65 and 74 with a super balance below $300,000 are able to make voluntary contributions in the first financial year that they don’t satisfy the work test requirement. Once eligible, they don’t have to remain under the $300,000 balance cap during the 12‑month period.
The annual concessional and non-concessional contributions caps will continue to apply, but members can access any unused concessional contributions cap amounts they have carried forward.
The government will assess total super balances at 30 June of the financial year in which members last met the work test.
Seek professional advice
If you’re considering contributing to your super under the proposed work test exemption, it may be wise to speak to your adviser to see how making additional super contributions may work to your advantage.