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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 final years before retirement.
Super rules if you’re in your 60s
Once you turn 60, the rules of the super system change. The key difference for most people is that withdrawing money from your super account is now free of tax.
Reaching age 65 is considered another condition of release, meaning you can withdraw your super benefit without needing to retire.
It’s not all plain sailing, however, as hitting age 67 means you must meet the requirements of the work test or work test exemption if you want to make many of the normal super contributions. These include salary-sacrifice, spouse, personal tax-deductible or non-concessional (after-tax) contributions into your account.
If you are aged 65 or older, you may be eligible to make a downsizer contribution into your super account of up to $300,000 from the total proceeds of selling your home without needing to meet the work test.
The main rules applying to your super during your 60s 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 60 and being paid $450 or more (before tax) in a calendar month, your employer must still pay SG contributions (10% in 2021–22) on your behalf into your super account.
If you meet the eligibility conditions, super is payable regardless of whether you are working full time, part time or are casually employed.
If you don’t meet these conditions, your employer is not required to make SG contributions for you.
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.
Even though you are in your 60s, there are still 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.
Until you are age 67, you may also be able to contribute up to three years of your annual non-concessional contributions cap in a single year. Using the bring-forward rule, you can contribute up to $330,000 at one time. (See section below for more details.)
Once you reach 67, you currently need to meet the requirements of the work test or work test exemption rules if you want to make non-concessional, salary-sacrifice and personal tax-deductible contributions. (See box earlier in the article for proposed changes to the work test contribution rules.)
Under age 67 you don’t need to meet a work test to make non-concessional contributions, but your total super balance must be under $1.7 million. From 1 July 2017 to 30 June 2021 the TSB cap was $1.6 million.
If you still want to make personal non-concessional contributions into your super account once you reach age 67, you need to meet the conditions of the work test or work test exemption, which requires you to be ‘gainfully employed’ for at least 40 hours in 30 consecutive days during the financial year. (See box earlier in the article for proposed changes to the work test contribution rules.)
Giving your super a last-minute boost with a big contribution can be a smart move, but ensure you do it before you turn 67 or you will miss out. Once you reach that age, you are not permitted to trigger a bring-forward arrangement.
While you are aged under 67, you may be able to contribute up to three years of your annual non-concessional contributions cap in a single year. Using the bring-forward rule, you may be eligible to 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 super balance (TSB).
If you trigger a bring-forward arrangement in a financial year and subsequently reach age 67 during the three-year bring-forward period, you will need to meet the requirements of the work test or work test exemption in the years in which you want to make the additional contributions. (See box earlier in the article for proposed changes to the work test contribution rules.)
Personal (or voluntary) tax-deductible super contributions
From 1 July 2017, you can claim a tax deduction for any personal voluntary contributions you make into your super account if you are aged 60 to 66 – whatever your employment status.
Once you reach age 67, however, you need to meet the work test or work test exemption rules to make this type of contribution and claim a deduction. (See box earlier in the article for proposed changes to the work test contribution rules.)
Once you hit age 65, you have a new opportunity to make super contributions using the downsizer rules, which have no work test requirement or upper age limit. (See box earlier in the article for proposed changes to the minimum age limit for downsizer contributions.)
Self-managed super funds (SMSFs)
Many people approaching retirement think about establishing their own SMSF to take more control of their retirement savings and pay themselves a regular super pension. 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
Even though you have reached your preservation age if you are aged 60 to 64, you still need to meet a condition of release to access your super benefit.
Once you reach age 65, however, the rules relax and you can take your super benefit without retiring if you wish.
Paying tax on your super
Once you reach age 60, most people can take their super benefit tax free (apart from members of certain public sector super funds).
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.
For people in their 60s who are still working, it may be worth considering starting a transition-to-retirement (TTR) income stream. This type of super pension allows you to gradually draw on your super benefits while you’re still working. After age 60, income from your TTR pension is tax free.