Anyone under the age of 65 can make super contributions without having to satisfy a work test. If you’re aged 65 or over, however, you’re subject to additional rules when making super contributions.
Here are ten tips to help you understand the super contribution rules for over-65s.
- Anyone aged 65 or over must satisfy a work test, before contributing. If you’re aged 65 or over (but under the age of 75), you can make super contributions if you’re at least gainfully employed on a part-time basis. In short, you must work for at least 40 hours in a period of not more than 30 consecutive days in the financial year in which you plan to make a super contribution. See Tip 6.
- People aged 75 or over cannot contribute to a super fund.
- If you intend to claim a tax deduction for concessional super contributions, you need assessable income, such as employment income, or business income, or net rental income, to justify the tax deduction.
- Tax-deductible super contributions and other concessional contributions are subject to 15% tax within a super fund, which means that claiming a tax deduction for super contributions may not be tax-effective if you pay less than 15 cents in the dollar tax on your personal income.
- The key term in the work test (see Tip 2) is “gainfully employed”. Gainfully employed means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment. According to the Australian Prudential Regulation Authority’s circular on contributions, “gain or reward” involves remuneration such as “salary or wages, business income, bonuses, commissions, fees or gratuities, in return for personal exertion”.
- The work test can be satisfied when “employment” involves any endeavour where you receive remuneration for your efforts, including farming, babysitting, cleaning, lawnmowing, gardening, consulting and paid employment. You will need to confirm with the tax office whether your arrangements satisfy the work test rules.
- Volunteer work does not count towards the 40-hour work test.
- An individual only has to work 40 hours of gainful employment in one 30-day period to satisfy the work test for contributing in a financial year.
- Any income that you receive for this work must be fully documented and declared for tax purposes.
- You cannot take advantage of the bring-forward rules when making non-concessional contributions, when aged 65 or over. The bring-forward rules permit an individual to make contributions representing the current year’s cap, and the next two years’ cap, in a single year.
Related articles:
Super concessional contributions: 2009/10 survival guide
Your 2009/10 guide to non-concessional (after-tax) contributions
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