Q: If I have retired from work and later on inherit a reasonable sum of cash, can I make a non-concessional contribution into my superannuation fund? OR is that only permitted while I am working, regardless of my age?
A: For the benefit of other readers, I will first explain the meaning of a non-concessional contribution. A non-concessional contribution is a superannuation contribution made from after-tax dollars. Such contributions used to be known as ‘undeducted’ contributions, and they are often described as after-tax contributions. You cannot claim a tax deduction for such a contribution.
You don’t have to be working to make super contributions, including non-concessional contributions, unless you’re aged 65 or over.
If you’re aged 65 or over (but under 75), you can make a non-concessional contribution if you satisfy a work test in the financial year that you contribute. In short, the work test is working 40 hours in any 30-day period in the financial year in which you intend to make.
Anyone under the age of 65 can make a non-concessional contribution to a superannuation fund whether they’re employed, self-employed or not employed. Note that the original source of the cash, such as an inheritance or tatts lotto win or employment income, is irrelevant.
If you’re aged 75 or over, you can no longer make super contributions. You can make super contributions up to the age of 74: in one instance you can make personal contributions after turning 75, provided you ensure that the contribution is made before the 28th day of the month following the month in which you turn 75.
Note: The bring-forward rules that permit an individual to make up to $300,000 (rather than $100,000) (for the 2017/2018) in non-concessional contributions in one year, only apply to individuals under the age of 65.
Warning! From 1 July 2017, the annual contribution caps were cut to $100,000 (non-concessional) and $25,000 (concessional). Further, anyone considering making non-concessional contributions must have a total superannuation balance of less than $1.6 million, For more information on the new non-concessional contributions rules, see SuperGuide article New $100,000 cap: Cut to non-concessional contributions cap.
I explain the contribution rules in more detail in the ‘Boost your super’ section of our website (see tab at the top of the page). In particular you may find the following articles useful:
- Your 2017/2018 guide to non-concessional (after-tax) contributions
- For over-65s: Ten super tips when making contributions
- New $100,000 cap: Cut to non-concessional contributions cap
- Bring-forward rule: 10 super facts you should know
- Super concessional (before-tax) contributions: 2017/2018 survival guide
- Concessional contributions caps to be slashed from July 2017