Recent changes to the rules around superannuation contributions including a work test change for people aged 65 and 66 have been made and come into effect from 1 July 2020. The changes enable people aged over 65 years, but under 67 years old to make voluntary concessional and non-concessional contributions to superannuation without the need to meet the work test â including members of SMSFs.
There is an additional change also expected to be made into law before 30 June 2020 that would enable individuals aged 65 and 66 to trigger the three year non-concessional bring-forward of contributions.
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What is the work test for superannuation?
If youâre (currently) aged between ages 65 and 74, to make contributions to superannuation you must meet the work test. The work test requires a minimum of 40 hours in any consecutive 30 day period.
The work undertaken must be paid work, effectively meaning you must be gainfully employed for that period. Volunteer work typically would not meet the eligibility criteria for the superannuation work test. The work test is the same for members of an SMSF.
An individual between the ages of 65 and 74 must meet the work test during the financial year before any (voluntary) concessional or non-concessional super contributions are made. This means the contributions cannot be made on the 1st of July of the year â at least 40 hours of âworkâ must have occurred before the contribution is made to the SMSF or superannuation account.
Opportunities to maximise non-concessional contributions after retirement
If an individual is turning, or has turned 65 during the 2020 financial year, depending on their total superannuation balance (TSB) they might be looking to trigger the bring-forward rule for non-concessional contributions to contribute $300,000 of after-tax monies prior to 30 June 2020, rather than just the annual allowable amount of $100,000.
With the change to the work test, and the proposed (not yet law) changes to the Income Tax Assessment Act (ITAA) 1997, an individual could potentially add an extra $200,000 of non-concessional contributions into the SMSF:
- $100,000 during the 2020 financial year;
- $100,000 during the 2021 financial year;
- $300,000 during the 2022 financial year
The above is reliant on the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020 becoming law prior to 30 June 2020.
Do SMSF members need to provide a form to the ATO for the work test?
No. If an individual meets the superannuation work test there is no need to report it to the ATO. The work test declaration is an internal document between the SMSF member and the trustee(s) of the fund.
There is no standard ATO form for the superannuation work test, however a written declaration should be made and kept on file for the accountant and auditor of the SMSF. SMSF members signing a declaration should ensure they meet the above superannuation work test conditions before doing so.
Template for an SMSF work test declaration
You can download a word document work test declaration form for SMSF members here: Work Test Declaration Template
What is âGainfully Employedâ in the context of the superannuation work test?
Gainfully Employed means employed or self employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. [SIS Regulation 1.03(1)]
To meet the superannuation work test, an individual aged over 65 (or age 67 from 1 July 2020) but under the age of 75, must complete 40 hours of gainful employment in a 30 day period. Once the work test is met in a financial year, the individual, including a member of an SMSF are able to make voluntary concessional as well as non-concessional contributions.
The ATO has also confirmed that people in receipt of JobKeeper will meet the work test for the 2020 and 2021 financial years.
Do you need to meet the work test to make a downsizer contribution?
No. There is no need for a person making a downsizer contribution to met the superannuation work test, and there is no age limit applicable for the downsizer contributions.
An individual aged 65 years old or older who meets the eligibility requirements, may be able to make a downsizer contribution into their superannuation of up to $300,000 from the proceeds of selling their home.
A downsizer contribution is not a non-concessional contribution and will not count towards the contributions caps. The downsizer contribution can still be made even an individual has a total super balance greater than $1.6 million.
A downsizer contribution will not impact a persons total super balance until their total super balance is re-calculated to include all contributions, including downsizer contributions, on 30 June at the end of the financial year. A person can only make downsizing contributions for the sale of one home. It canât be accessed again for the sale of a second home. Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.
More information on downsizer contributions can be found on the in our previous website article here: Downsizing contributions into superannuation
Other questions relating to the work test for SMSF superannuation contributions
The following are other questions we are often asked when it comes to the work test and contributions:
Has the work test been abolished for people over 65?
No, unfortunately the work test has not been abolished for individuals over age 65, however the work test change age has been increase to age 67, meaning an additional two years where an individual can make concessional and non-concessional contributions after 1 July 2020.
Can I access my super at 60 and still work?
Yes. When an individual hits preservation age (currently ages 58 or older but increasing to age 60) they can have limited access to superannuation if they are still working.
This limited access is in the form is a non-commutable income stream, also known as a âtransition to retirement pensionâ, TRIS or TRIP. A transition pension is tax free for an individual over age 60. The maximum withdrawal is 10% of the individuals account balance (at start of financial year or start of the pension). The earnings / income of the fund account or SMSF is still taxable.
Once an individual over age 60 drawing a TRIS pension meets a condition of release, such as retiring or changing jobs (significant change in employment) the entirety of their super becomes ânon-preservedâ which enables lump sums, pensions above 10% and the associated earnings become tax exempt.
Can I contribute to superannuation after age 60, 65, 67, 70 or 75?
The following table confirms eligibility to make superannuation contributions up to 30 June 2020 prior to the work test change.
| Age | Non-Concessional Contributions (After Tax) | Concessional Contributions (Tax Deductible) |
| Under Age 65 | All contributions can be accepted except downsizer contributions, subject to the $1.6m total super balance restriction. | All contributions can be accepted except downsizer contributions. |
| Ages 65 – 74 | Member must meet the work test for fund to accept non-concessional contributions.
Total super balance restrictions.
Downsizer contributions can be accepted. | Mandated employer contributions (SGC) can be accepted.
Member must meet the work test for fund to accept personal concessional contributions.
|
| Personal contributions (concessional and non-concessional) and other non-mandated contributions received, on or before 28 days after the end of the month in which the member turns 75 years old. | ||
| Age 75 or older | No contributions can be accepted except from downsizer contributions. The work test is not applicable. | |
The following table confirms eligibility to make superannuation contributions after 1 July 2020 due to the work test change.
| Age | Non-Concessional Contributions (After Tax) | Concessional Contributions (Tax Deductible) |
| Under Age 67 | All contributions can be accepted except downsizer contributions, subject to the $1.6m total super balance restriction. | All contributions can be accepted except downsizer contributions. |
| Ages 67 – 74 | Member must meet the work test for fund to accept non-concessional contributions.
Total super balance restrictions.
Downsizer contributions can be accepted. | Mandated employer contributions (SGC) can be accepted.
Member must meet the work test for fund to accept personal concessional contributions.
|
| Personal contributions (concessional and non-concessional) and other non-mandated contributions received, on or before 28 days after the end of the month in which the member turns 75 years old. | ||
| Age 75 or older | No contributions can be accepted except from downsizer contributions. The work test is not applicable. | |
Can a 75 year old make superannuation contributions?
Personal contributions (concessional and non-concessional) and other non-mandated contributions received, on or before 28 days after the end of the month in which the member turns 75 years old. In addition the work test must apply in the financial year the contributions are made.
The only other superannuation contributions a person 75 years or older can make are downsizer contributions. From 1 July 2018, if you are 65 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.
