Announced as part of the 2018 Federal Budget, and effective from 1 July 2019, the work-test exemption was introduced to allow recent retirees the ability to contribute to their superannuation without having to meet the work test.
The work-test applies to those between ages 65 and 74. Members between these ages must have been gainfully employed for 40 hours within 30 consecutive days during the financial year before making a member or voluntary contribution. Gainful employment is defined as employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation, or employment. It does not apply to charity work.
From age 75, members may only make mandated employer contributions and downsizer contributions.
THE WORK-TEST EXEMPTION
Since 1 July 2019 recent retirees may be able to make voluntary and personal contributions for an additional financial year. The work-test exemption applies where the:
- Member is between ages 65 and 74,
- Has a total superannuation balance below $300,000 as at 30 June the previous financial year, and
- The member met the work test the previous financial year.
The work-test exemption may only be relied on once in a lifetime. A member cannot use the exemption, return to work, and then use the exemption again in a later financial year.
Where a member meets the criteria for either the work-test or work-test exemption, the contributions are still subject to the annual contribution caps of $25,000 for concessional (pre-tax) and $100,000 non-concessional (post-tax).
THE WORK-TEST EXEMPTION AND THE BRING FORWARD RULE
The bring-forward rule allows members under age 65 with a total superannuation balance of less than $1.4 million to make up to three years’ worth of non-concessional contributions in a single year, which is $300,000.
Where a member satisfies the criteria for the work-test exemption and are under age 65, they may trigger the bring-forward rule.
The work-test exemption presents an important planning opportunity for clients and their advisers. It allows recent retirees with low superannuation balances to boost their retirement savings. If you would like to discuss the Work-Test Exemption further please contact your Bell Potter adviser.