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 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 guide to the super rules that apply in the final years before retirement.
Super rules if you’re in your 60s
Once you reach age 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 65 means you need to meet the requirements of the work test or work test exemption if you want to make many of the normal types of 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.
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 (9.5% in 2019/20 and 2020/21) into your super account. Once you meet these conditions, super is payable for all employees 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.
For more information, read SuperGuide articles:
- Your simple guide to Superannuation Guarantee (SG) contributions
- Superannuation Guarantee rules for employers
- What to do if your employer doesn’t pay your super
Contributions caps
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 2017, the general concessional (before-tax) contributions cap is $25,000 for everyone, regardless of their age. (From 1 July 2018, you can also make ‘carry-forward’ concessional contributions if you qualify, which includes having a Total Superannuation Balance of (TSB) less than $500,000.)
Your annual non-concessional (after-tax) contributions cap is $100,000.
If you are under age 65 you do not need to meet the work test or work test exemption rules, but once you reach the milestone of 65, you must be ‘gainfully employed’ if you still want to make non-concessional, salary sacrifice and personal tax-deductible contributions.
For more information, read SuperGuide articles:
- 2020/21 guide to concessional contributions (before-tax super contributions)
- 2020/21 guide to non-concessional contributions (after-tax super contributions)
- How to contribute to your super in your late 60s: What are the rules?
- Super contributions before and after age 65
Work test
If you still want to make personal non-concessional contributions into your super account once you hit age 65, 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.
For more information, read SuperGuide article Work test: Making super contributions over 67.
Bring-forward contributions
Giving your super a last-minute boost with a big contribution can be a smart move, but ensure you do it before you reach age 65 so you don’t have to worry about meeting the work test. If you are eligible, this means you can make up to $300,000 of non-concessional (after-tax) contributions in the same year. (The eligibility criteria include having a TSB under $1.6 million.)
If you trigger a bring-forward arrangement in a financial year and subsequently reach age 65 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.
Need to know
In the 2019/20 Federal Budget, the government announced people aged under 67 at any time during a financial year (e.g. age 65 or 66) would be able to trigger the bring-forward rule to make non-concessional contributions.
The legislation covering these new rules is currently before the House of Representatives, but is yet to become law. This new legislation will allow people aged 65 or 66 to access the bring-forward provisions.
For more information (including on how the work test interacts with the bring-forward rule), read SuperGuide article A super guide to understanding the bring-forward rule.
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.
For more information, read SuperGuide article How do tax-deductible superannuation contributions work?.
Downsizer contributions
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 age limit.
Making a downsizer contribution involves selling your home and making a contribution into your super account of up to $600,000 for a couple ($300,000 each), provided you meet the eligibility rules.
For more information, read SuperGuide article Downsizer contributions: How do they work and what are the current rules?
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 four members at any one time. A member cannot be an employee of another member unless they are related.
Need to know
In the 2018/19 Federal Budget, the government announced a proposal to increase the number of SMSF members from four to six. In July 2020, the government announced the legislation enabling this proposal had been delayed to a future date.
You cannot be a trustee of an SMSF is 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.
For more information, read SuperGuide article What is a self-managed super fund (SMSF)?
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.
For more information, read SuperGuide articles:
- Accessing super: Ceasing employment after 60
- Accessing super: Reaching age 65
- When can I access my super? All the conditions of release explained
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).
For more information, read SuperGuide article Over age 60? A simple tax guide to accessing your super benefits.
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.
Need to know
On 22 March 2020, the federal government announced that the minimum rate that super pensioners must drawdown on their pension would be temporarily halved for 2019/20 and 2020/21 down to 2.5%.
The reduction in the minimum pension drawdown rate was due to many retirees losing a significant portion of their super account balance in the wake of sharemarket volatility due to the COVID-19 crisis.
For more information, read SuperGuide articles:
Transition to retirement pensions
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.
For more information, see SuperGuide articles:
- Guide to transition to retirement pensions (TTRs or TRISs)
- Did tax kill the transition to retirement magic pudding?
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