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There are lots of rules when it comes to our super system. But not every rule applies to you at every age, so it’s worth figuring out which ones have an impact in your particular age group.
The rules at different ages govern how much and when you can contribute to super, when you can get your hands on your savings and how much tax you will pay. These rules are designed to stop people taking advantage of the generous tax benefits offered as part of Australia’s super system.
To make things a bit easier to understand, here’s SuperGuide’s simple explainer of the super rules that apply in the latter years of your working life.
Super rules if you’re in your 50s
Now you are closing in on retirement, the rules around contributing and withdrawing your super start to change. Although the annual contributions caps stay much the same, these years are your chance to boost your super without having to worry about the work test that starts to apply from age 67.
When it comes to accessing your super account, if you decide to withdraw your super now, you will generally pay more tax than if you wait until you reach age 60.
The rules that apply to your super during your 50s are split between those covering when money goes into your super account (contributions) and when it comes out (withdrawing).
1. Contributing to super
Superannuation Guarantee (SG)
If you are aged over 18 and being paid $450 or more (before tax) in a calendar month, your employer must pay SG contributions (10% in 2021–22) on your behalf into your super account.
If you meet these eligibility conditions, super is payable regardless of whether you are working full time, part time or are casually employed. If you are a contractor paid ‘wholly or principally for labour’, you may be considered an employee for super purposes and entitled to SG payments.
If you work in a private or domestic capacity (for example, as a paid nanny), you still need to work more than 30 hours per week to qualify for employer-paid SG contributions.
If you don’t meet these conditions, your employer is not required to make SG contributions for you.
There are annual limits or caps on the amount of money you and your employer can contribute into your super account.
From 1 July 2021, the annual general concessional (before-tax) contributions cap is $27,500 for everyone, regardless of their age. From 1 July 2017 to 30 June 2021, the annual general concessional contributions cap was $25,000.
Some people may have a higher annual concessional contributions cap for a particular year. From 1 July 2018, you can also make carry-forward concessional contributions if you qualify. Carry-forward contributions allow you to use any of your unused annual concessional contributions cap for up to five years to make a larger concessional contribution in a future year.
From 1 July 2021, your annual general non-concessional (after-tax) contributions cap is $110,000. From 1 July 2017 to 30 June 2021, the annual general non-concessional contributions cap was $100,000.
As you are aged under 67, you may also be able to contribute up to three years of your annual non-concessional cap in a single year. Using the bring-forward rule, you can contribute up to $330,000 ($110,000 x 3 years = $330,000) in a single year. The actual amount you can contribute using the bring-forward rule depends on your current Total Superannuation Balance (TSB).
You don’t need to meet a work test to make a non-concessional contribution in your 50s, but your TSB must be under $1.7 million. From 1 July 2017 to 30 June 2021 the TSB cap was $1.6 million
Personal (or voluntary) tax-deductible super contributions
From 1 July 2017, most people in their 50s – whatever their employment status – are able to claim a tax deduction for any personal voluntary contributions they make into their super account.
If you’ve got cash to spare and would like to boost your retirement savings, making a tax-deductible voluntary super contribution can be a great way to do it in the latter years of your career.
Self-managed super funds (SMSFs)
For many people in their 50s, it could be worth thinking about establishing your own SMSF if you are interested in taking more control of your retirement savings. However, it’s important to remember that SMSFs must adhere to lots of rules and you will have the ATO looking over your shoulder.
An SMSF can have no more than six members at any one time. A member cannot be an employee of another member unless they are related.
You cannot be a trustee of an SMSF if you have been convicted of an offence involving dishonest conduct, been subject to a civil penalty under super law, are insolvent or an undischarged bankrupt, or been disqualified from acting as a trustee of a super fund.
2. Withdrawing your super
Getting your money
To access your super, you need to have reached your preservation age and met a condition of release.
If you are in your 50s, your preservation age will be between 55 and 59 if you were born before 1 July 1964.
Hardship, compassionate and COVID-19 provisions
If you are in your 50s, it’s possible to access some of your super early if you are suffering severe financial hardship, provided you meet strict eligibility conditions.
You can also apply for early release based on compassionate grounds.
During 2019–20 and 2020–21, the government permitted super fund members impacted by COVID-19 to withdraw up to $20,000 from their super account if they met strict eligibility criteria.
From 1 July 2021 to 30 June 2030, people who used this measure to release money from their super account will be able to re-contribute the money without their contribution counting towards their annual non-concessional contributions cap. If you choose to re-contribute your COVID-19 withdrawal amount, you cannot claim the contribution as a personal tax deduction, and it’s limited to the amount you chose to withdraw.
Paying tax on your super
If you decide to access your super benefits during your 50s, you will pay a higher rate of tax on your money than if you wait until you turn 60.
Also be aware that you will pay different rates of tax on your super benefit if you access it when you are under your preservation age, compared with accessing it if you are over your preservation age but under age 60.
Taking a super pension
If you decide to start a super pension, you will be required to withdraw a minimum amount each year based on your age.
At this stage of life, it may be worth considering starting a transition-to-retirement (TTR) income stream as you move towards retirement. This type of super pension allows you to gradually draw on your super benefits while you’re still working.