Q: I turn 65 in March 2019, which means I will be 64 years of age for a large part of the 2018/2019 financial year, but of course I turn 65 during the 2018/2019 financial year. My understanding is that because I will be under 65 for part of the 2018/2019 financial year then I can exercise the bring-forward provisions and make non-concessional contributions up to $300,000 before I turn 65, if I choose to do so. Is this correct?
A: You ask a very popular question, and the rules relating to making super contributions for an individual turning 65 during a financial year are a little peculiar, due to the operation of the over-65s work test, and the operation of the bring-forward rules for non-concessional contributions.
The response outlined below is of a general nature, and you will need to verify the rules applicable for your own unique circumstances with the ATO, or your accountant or adviser.
The general rule is that if an individual is under the age of 65 on 1 July of a financial year, then that individual can contribute more than $100,000 (for the 2018/2019 year, or for the 2017/2018 year) in non-concessional contributions in a single financial year, triggering the bring-forward rules. In short, they can make up to $300,000 (for the 2018/2019 year, or for the 2017/2018 year) in non-concessional (after-tax) contributions in the financial year even though they turn 65 during that financial year, subject of course to not having triggered the bring-forward rules in the two previous financial years.
Special circumstance: If an individual turns 65 during a financial year, and wants to make a non-concessional (after-tax) contribution after turning 65 in that same financial year, then he or she must satisfy a work test. After ‘turning 65’, the maximum non-concessional contribution is $100,000 for the 2018/2019 year (or for the 2017/2018 year). Generally speaking, the bring forward is no longer available after turning 65, EXCEPT in one unique instance. In the year that an individual turns 65, he or she can make a non-concessional contribution greater than $100,000 for the 2018/2019 year (or for the 2017/2018 year) before or after turning 65 during that year, triggering the bring-forward rules. In these circumstances, if a person makes the contribution after turning 65, then they must also meet the work test before making the super contribution.
The work test that enables Australians aged 65 years and over (up to the age of 75) to make super contributions involves working 40 hours in any 30-day period in the financial year in which you intend to make the contribution. For more information about the work test, see SuperGuide article Over-65s work test: How does it operate?.
Note: An individual can bring-forward up to 2 years’ worth of non-concessional contributions in the year that they turn 63 or 64 or 65, but that doesn’t mean they can make super contributions beyond the age of 65 without satisfying a work test, or in a financial year when they are 65 years or older on the 1 July of the financial year. For more information see SuperGuide articles After-tax super contributions: Beef up using a bring forward and Non-concessional contributions: Tread carefully when aged 63 or 64 or 65 (3 Q & As).
In short, an individual who is 64 on 1 July 2018 (or 1 July 2017) can take advantage of the bring-forward rules and make up to $300,000 for the 2018/2019 year (or for the 2017/2018 year) in non-concessional contributions. If they make those contributions after turning 65 in that same financial year, then they can still take advantage of the bring-forward rules in that specific financial year, but they must satisfy a work test before contributing. For more information see SuperGuide article Turning 65: Maxing out the after-tax contributions cap.
The specific legislative reference (SIS Regulations 7.04) is set out below:
(3) In addition to subregulation (1), the regulated superannuation fund must not accept any fund-capped contributions in a financial year in respect of a member that exceed:
(a) if the member is 64 or less on 1 July of the financial year–three times the amount of the non-concessional contributions cap; or
(b) if the member is 65 but less than 75 on 1 July of the financial year–the non-concessional contributions cap.
Rules applicable for 2016/2017 year: If an individual was under the age of 65 on 1 July 2016, year, then that individual could contribute more than $180,000 (for the 2016/2017 year) in non-concessional contributions for that financial year, triggering the bring-forward rules. If they planned to make further NCCs sincethe 2017/2018 year onwards then they need to be aware that the bring-forward cap is no longer $540,000, but a transitional cap of $380,000 ($180,000 + $100,000 + $100,000) for the 3-year period. In short however, they could have made up to $540,000 in non-concessional (after-tax) contributions during the 2016/2017 year, even though they turned 65 during that financial year, subject of course to not having triggered the bring-forward rules in the two previous financial year. For more information on the transitional bring-forward cap, see SuperGuide article Understanding the transitional bring-forward rule (for 2018/2019 and 2017/2018 years).
For more information…
For more information about the bring-forward rule, see the following SuperGuide articles:
- Bring-forward rule: A definitive super guide
- New normal: $100,000 non-concessional contributions cap
- After-tax super contributions: Beef up using a bring forward
- Non-concessional contributions: Tread carefully when aged 63 or 64 or 65 (3 Q & As)
- Super contributions before and after age 65
- For over-65s: Ten tips when making super contributions