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Whether you’re staying in the workforce longer to boost your superannuation, or making more, early contributions to your super, you’re likely to be aware of the “superannuation work test” that required you to prove you were employed before your super accepted contributions.
As of 1 July 2022, some changes were made to the work test, namely it was abolished if you’re 67 years or older. That said, there’s still some cause for caution as there is more to consider.
Let’s take a look at the changes while first covering what the work test(and the exemption) actually is…
Since the beginning of our super system, contributions have been tied to employment and income, meaning you needed to be working to make or receive contributions to your superannuation.
As part of that, you were required to prove you were gainfully employed before your fund would accept a contribution. This is referred to as the superannuation work test.
Back in 2004, the rules were changed for people under 65, abolishing the work test for that age group, but the rules remained for those between 65 and 75 years of age.
In 2020, regulations changed further, lifting the threshold to age 67 in recognition that many Aussies are staying at work longer. This meant you didn’t need to meet a work test requirement for making personal or non-concessional contributions if you were under 67.
Now, in 2022, the law was repealed for contributions made for those aged between 67 and 75 wanting to make non-concessional or salary-sacrifice contributions. It’s important to note that contributions here are still subject to contribution cap limits.
The main caveat is this: If you’re between 67and 75 and wish to make a personal contribution (for which you’d like to claim a tax deduction), you are still required to meet the requirements of the work test.
The key to these is that once you turn 67, you must be able to prove you are gainfully employed. Any younger, and you’re in the clear.
You must be gainfully employed. This is defined as working at least 40 hours of 30 consecutive days during the financial year in which you’re making contributions. There’s no rule around how the hours are structured, but they must be over 30 consecutive days.There is no maximum number of hours.
Interesting …
Super funds were previously the administers of the work test rules, requiring you to complete a declaration before they’d accept your contribution.Since July 2022, funds are no longer required to administer the work test at the time they accept the contribution, it now falls to the ATO to be responsible for checking you meet the work test. This will happen when you lodge your income tax return as part of the normal assessment.
More broadly, the ATO deem you gainfully employed if you’re employed or self-employed and getting paid for the work.Receiving payments for assisting family members (gardening, baby sitting etc),doesn’t meet the definition for those wondering. It also doesn’t allow for passive investment income through dividends or property investment to qualify under the work test.
On 1 July 2019 the government introduced an exemption from the work test for voluntary super contributions made in the first income year after you retire designed to allow recent retirees more time to get things in order while preparing for retirement.
To qualify for the exemption you must:
Remember though, since 1 July 2022 if you’re between 67 and 75, you no longer need to use the work test exemption to make or receive non-concessional or salary-sacrifice contributions.
You can contribute any amount up to your current concessional contributions cap for a particular financial year if you’re using the work test or work test exemption to make contributions for which you intend to claim a tax deduction.
As at 2022-2023, the annual general concessional contributions cap is $27,500, but you may be able to contribute more if you have unused concessional contributions caps from previous years. This is called a carry-forward contribution.
As with just about any matter involving superannuation (and indeed related taxation), whether it be a Self Managed Super Fund or not, the best advice is to get advice. Speak to the Attune Advisory superannuation experts as part of your planning. We’re hereto give you tailored, strategic advice that will remove the guesswork and put you in the best position for retirement possible for you. Give the team a call on 1300 866 113 or send us an email to start the conversation.
