In May 2021, the Australian Government announced it will make changes in the super contribution rules. It is not yet law, but is expected to apply from 1 July 2022, in which seniors between 67 to 74 years old will be able to make or receive personal contributions and salary sacrificed contributions without meeting the work test, subject to the existing contribution caps.
Here are some of the benefits these changes offer, and how they could allow you to make extra contributions and top up your super fund.
The Work Test
The work test is carried out annually on someone who has a super fund to check if they are gainfully employed, therefore, able to contribute and receive contributions made on their behalf. The test is conducted by your super fund, rather than the ATO. However, the ATO has the final say in case of any dispute or doubt.
To be able to pass the test, you have to be gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made. Once you’ve passed, you can make contributions for that entire financial year. A one-off exemption is allowed if your super fund is worth less than $300,000.
Opportunities to maximise your super contributions
Primarily, the work test applied to everyone. But in 2004, the super rules were changed so the test only applied to seniors aged 65 and over. Then another change occurred that increases the age from 65 to 67 in which you won’t need to pass a work test. You have two extra years to maximise your super contributions.
It opens up opportunities for seniors with large funds, whose total super balance is less than the general transfer balance cap, currently $1.7 million. If you make contributions into your super using the work test or work test exemption, you can contribute any amount up to the current concessional contributions caps ($27,500) and non-concessional contributions caps ($110,000) for that financial year.
The bring-forward cap is also increased from age 65 to 67, in which you roll up three years of contributions. Those aged 65 and 66, who were unable to access the bring-forward non-concessional contributions cap, may do so subject to their total super balance. They may also use the bring-forward contribution rules to make a bigger contribution during the 12-month exemption period.
Using the ASAG First Account to top up your super
The plan to change the super work test for the benefits of seniors is good news. Any pension rule that helps you maximise super contributions is very much welcome.
At ASAG, we support our Australian customers, who are about to enter retirement or already in retirement, by offering our equity release solutions to help boost their standard of living. One in particular is the ASAG First Account.
The purpose of acquiring the ASAG First Account is to improve your retirement income stream. It allows you to access the wealth in your home without ongoing payments and having to sell your property. The loan is paid off when you permanently leave your home, either you: downsize, move to residential care, or pass away. The funds you receive can be used as you see fit, which may include maximising your super contributions and other objectives in your Retirement Planning.
Our team at ASAG can assist you with all the details you have to know on how the loan works. Our lines are open on 1300 002 724 and at info@asagfirst.com.au so you can contact us or send your enquiries about our equity release solutions.
You can also get started by using our free tool below to assess your available equity.