The work test and work test exemption explained

If you’re an older Aussie looking to make super contributions, you may have noticed more rules begin to apply as the years go on. If you’ve heard people talk about the work test and work test exemption rules, below we explain what these are, who they apply to and when.

What is the work test?

The work test requires you to be in paid work (that is employed, or self-employed for gain or reward) for a minimum of 40 hours over a consecutive 30-day period during a financial year, before you’re able to make voluntary super contributions.

What are voluntary super contributions?

Voluntary super contributions generally include salary sacrifice contributions, tax-deductible contributions, as well as personal contributions, which you don’t claim a tax deduction for. They don’t include compulsory SG contributions your employer is required to make into your super fund.

Who does the work test apply to?

If you’re age 67 to 74 and want to make voluntary contributions, you’ll generally need to satisfy work test requirements, noting that once you reach age 75, you’re generally ineligible to make voluntary contributions.

Note, the work test doesn’t apply if you’re making a downsizer contribution. This is where Aussies aged 65 or over can put up to $300,000 into their super using the money from the sale of their main residence, regardless of restrictions that otherwise apply.

What’s the work test exemption?

The work test exemption allows people aged 67 to 74, with a total super balance below $300,000 on 30 June of the previous financial year, to make voluntary super contributions for a period of 12 months from the end of the financial year in which they last met the work test.

To make a super contribution using the work test exemption, you must satisfy all of the following rules:

• you met the work test in the previous financial year
• your total super balance (across any super funds you may have) was below $300,000 at 30 June of the previous financial year
• you haven’t previously made contributions to super using the work test exemption

Is there anything you need to do?

You may need to make a declaration with your super fund to confirm you’re eligible to make voluntary contributions under the work test. You might also need to make a declaration with your super fund to confirm you’re eligible for the work test exemption, so make sure you’re across what your super provider may require.

Generally, the last time your super fund can accept a voluntary contribution from you is 28 days after the end of the month you turn 75, unless you’re making a downsizer contribution.

What else do you need to know?

• If you’re making contributions to your super, there are limits on the amount of concessional and non-concessional contributions you can make each year. If you exceed super contribution caps, additional tax and penalties may apply.
• If you’re making spouse contributions, the work test and work test exemption also applies to the receiving spouse, as do annual contribution caps.
• When you turn 65, you typically have full access to your super, regardless of whether you’re working or are retired.
• The value of your investment in super can go up and down. Before making extra contributions, make sure you understand and are comfortable with any potential risks.

If you’d like more information about the super contribution rules when you’re in your 60s and 70s, please give us a call.
 

©AWM Services Pty Ltd. First published July 2021