Change to Super contribution rules for over 65's
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- By Michael Sheridan
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- Date posted:
- 27 October 2020, 12:15 PM
There are some little-known changes that recently came into effect that over 65’s may need to know about. On 1 July 2020, the Federal Government implemented changes to the work test exemption which was originally proposed in the 2018 Federal Budget.
Under former rules, individuals aged 65 or over (but under the age of 75) were required to satisfy a ‘work test’ before their super fund could accept after-tax contributions. That is, they were required to have worked at least 40 hours within 30 consecutive days in a financial year.
Since 1 July 2020, individuals under the age of 67 are eligible to make non-concessional contributions to super without needing to meet this work test. This has been introduced to progressively align the work test with the eligibility age for the age pension which is legislated to increase to 67 by 1 July 2023.
Once you reach age 67 you will then be required to meet the work test or use the one-off work test exemption.
This change creates unique opportunities for individuals approaching retirement who might now have an option to contribute, or even take advantage of a re-contribution strategy which can assist in equalising spouse balances or deliver benefits from an estate planning perspective such as reducing tax for adult children beneficiaries.
That is not all the good news though!
A proposed change to the legislation that we are still waiting for is the extension of the bring forward rule for non-concessional contributions for those aged 65 to 67. This amendment is presently before Parliament.
Currently individuals under 65 can “bring forward” future years non-concessional contribution caps and make contributions of up to $300,000 (subject to their total super balance) at any time during a fixed three-year period.
This amendment was intended to commence from 1 July 2020 however it has been delayed as Parliament have not been able to sit on a regular basis for most of the year because of COVID-19.
For now, we continue to wait with anticipation....
Find out more:
Michael is a Senior Financial Planner at Morgans Port Macquarie. Michael takes a highly personal and holistic approach to understanding his clients' financial situations and needs. Michael specialises in creating wealth building strategies, and has a strong knowledge of estate planning and administration. If you’d like to discuss how this may affect your situation or what opportunities may be available to you, contact Morgans Port Macquarie office on [email protected] or via (02) 6583 1735.
General Advice warning: This article is made without consideration of any specific client’s investment objectives, financial situation or needs. It is recommended that any persons who wish to act upon this report consult with their investment adviser before doing so. Morgans does not accept any liability for the results of any actions taken or not taken on the basis of information in this report, or for any negligent misstatements, errors or omissions.