If you’re 65 or over, you can continue to build your superannuation with compulsory employer contributions (such as Super Guarantee contributions your employer pays where you are eligible). However, if you’re making voluntary contributions, which you may do through salary sacrifice (where you elect to have a portion of your before-tax income paid into your super), or via additional after-tax contributions, you must satisfy work test requirements and be under age 75.
This is important, because if you do come into money (for instance, you might receive an inheritance or make money from an investment), you generally won’t be able to put this cash into super otherwise.
The work test for those aged 65 or over
If you’re 65 or over, you must first satisfy the government’s ‘work test’ before you are eligible to make any voluntary contributions. Once you reach age 75 you are generally ineligible to make voluntary contributions.
How does it work?
If you're 65 to 74 at the time you're contributing, you must've been gainfully employed (meaning you’re getting paid) during the financial year for at least 40 hours over a period of no more than 30 consecutive days. The 30 days can be any consecutive 30-day period within the financial year. In other words it doesn’t have to be in the same month, and since it’s a minimum requirement there is no maximum limit to how much you can work.
The work test must however be met before you are eligible to make the contribution. And, you also might need to submit a work test declaration form to your super fund to confirm you’ve met the government’s requirements.
Contributions caps that apply when you’re 65 or over
There is a maximum amount of concessional and non-concessional contributions you can make into your super each year.
What your employer pays into your fund (under the Superannuation Guarantee), what you might elect your employer to pay via a salary sacrifice arrangement, as well as personal after-tax contributions that you claim a tax deduction on, all count toward what’s called your concessional contributions cap. Personal after-tax contributions that you don’t claim a tax deduction on will count toward your non-concessional contributions cap.
Here is a high-level summary of how much you can put in each year.
||$25,000 per annum
||$100,000 per annum and up to three years of annual caps ($300,000) under bring-forward rules
||65 or over
||$100,000 per annum
Things to note
- If you exceed the super contribution caps, additional tax and penalties may apply.
- If you have super assets of $1.6 million or more as at 30 June of the previous financial year, you can’t make additional after-tax contributions to your super, or you may be penalised.
- If you’re 65 or over at the time of making a contribution, a work test must be satisfied. However, Australians aged 65 and over, can now make an after-tax ‘downsizer’ contribution to their super of up to $300,000 using the proceeds from the sale of their home, regardless of their work status, super balance, or contributions history.
Rules when downsizing for retirement
People aged 65 and over can now make a voluntary contribution to their super of up to $300,000 using the proceeds from the sale of their home – regardless of their work status, super balance, or contributions history. For couples, both people are able to take advantage of this opportunity, which means up to $600,000 per couple can be contributed toward super.
How does it work?
Proceeds from the sale of your home that are contributed into super as part of this initiative can be made in addition to any other contributions you’re eligible to make.
- The contracts for sale must be exchanged on or after 1 July 2018
- You must be age 65 or over when you make the contribution
- The property that’s sold needs to have been your (or your spouse’s) main place of residence at some point in time
- You or your spouse need to have owned the home for at least 10 years
- The property that’s sold must be in Australia and excludes caravans, mobile homes and houseboats.
Downsizing contributions are not tax deductible and can be made regardless of super caps and restrictions that otherwise apply when making super contributions.
Things to note
There aren’t any special Centrelink means test exemptions that apply to the downsizing contribution. Due to this, there may be means testing implications as a result of downsizing, which need to be considered. Meanwhile, additional rules may apply to your situation, so do your research and speak to your adviser before making any decisions.
Note, a Downsizer Contribution form from the Australian Taxation Office will need to be provided to AMP when making, or prior to making, this type of contribution.