The work test exemption for new retirees

The government has provided more time for Australians aged 65 to 74 to boost their retirement savings via an exemption from the superannuation work test.

Announced as part of the 2018 Federal Budget, the exemption from the work test means that from 1 July 2019, Australians aged 65 – 74 with a total superannuation balance below $300,000 are able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test.

The pre-1 July 2019 rules around putting money into your super fund

Any Australian aged under 65 can contribute money to their super, whether they are working or not.

Between the ages of 65 and 74 you can only contribute if they meet the work test.

After age 75 you cannot make any personal contributions to super, but if you’re still working your employer can deposit mandated superannuation guarantee payments.

From 1 July 2019

A new one year exemption from the work test applies for some retirees.

From 1 July 2019, Australians aged 65-74 with a total superannuation balance below $300,000 as at the previous 30 June, will be able to make voluntary contributions to their QSuper Accumulation account for 12 months from the end of the financial year in which they last met the work test – this will be known as the work test exemption.

In terms of the amount of money that could be contributed, the existing concessional contribution cap of $25,000 and non-concessional contribution cap of $100,000 will continue to apply.

Why do this?

Many pre-retirees – those currently nearing retirement – have not had a complete career of compulsory super contributions from their employers.

Superannuation only became compulsory (via the superannuation guarantee) in 1992 and then at just 3-5% of wages. It took a decade to rise to 9%, currently 9.5% and slowly climbing towards 12%.

“The work test exemption will give older Australians additional flexibility to contribute more into superannuation as they move into retirement,” said the government.

Please note that further proposed changes to the work test exemption were announced for 2020/21 as part of the 2019/20 federal budget. These are yet to be legislated, but are summarised here.

1 Australian Taxation Office guide to personal super contributions https://www.ato.gov.au/definitions/?anchor=p1358-111493#p1358-111493
2 Budget 2018-19 fact sheet 3.2 – preparing financially for a longer and more secure life https://budget.gov.au/2018-19/content/factsheets/download/preparing-finanacially.pdf