Superannuation Contributions Over 65: What are the Rules?
Written by: Chris Strano
Once you reach age 65, the superannuation rules change, especially when it comes to contributions. Don’t worry, you can still contribute – you just need to know that the goal posts have moved a little since you were that young, frisky 64 year-old.
Super Contributions Over 65
If you are over age 65, the rules relating to how much you can contribute to super are based on the type of contribution, your age bracket, and whether or not you meet the work test (or work test exemption). An explanation of the work test has been included below.
The three types of contributions you can make to super over age 65 are non-concessional contributions, concessional contributions and downsizer contributions.
The information below defines each of these types of contributions and details how much you can contribute as someone over age 65.
Non-Concessional Contributions Over 65
A non-concessional contribution is a contribution you can make to super with after-tax money. This is usually money you contribute into super from your bank account and do not claim a personal tax deduction for.
If you are under age 67, you are eligible to make non-concessional contributions to super without needing to satisfy the work test.
If you are aged between 67 and 74, you are only able to make non-concessional contributions if you meet the work test or work test exemption.
If you are 75 years or older, you are unable to make non-concessional contributions to super.
The non-concessional contribution cap is $100,000. This is the maximum amount you are able to contribute to super in one financial year. However, if you had a total super balance of $1.6 million or more on 30 June of last financial year, you are unable to make any further non-concessional contributions to super.
Related article: Contributing to Super After Retirement
Concessional Contributions Over 65
A concessional contribution is a contribution that has been made to superannuation and someone has claimed a tax deduction for it. These include employer superannuation guarantee payments, salary sacrifice contributions and personal concessional contributions. They are classified as concessional contributions because either you or your employer has claimed a tax deduction for making the contribution.
Regardless of your age, your employer is required to make mandated employer contributions into your account in respect of your earned wage or salary.
If you are under age 67, you are permitted to make salary sacrifice or personal concessional contributions without meeting the work test.
If you are aged between 67 and 74, you are only able to make salary sacrifice and personal concessional contributions if you meet the work test or work test exemption.
If you are 75 years or older, you are unable to make personal concessional or salary sacrifice contributions to super.
The concessional contribution cap is $25,000. This is the maximum amount you are able to contribute to super in one financial year. However, you may be able to utilise any unused portion of your concessional contribution cap that has been carried-over from previous financial years.
Downsizer Contribution Over 65
If you are over 65, you are able to make a downsizer contribution of up to $300,000 into superannuation using proceeds from the sale of your home.
While a downsizer contribution is treated as a non-concessional contribution, it does not count towards the non-concessional contribution cap. Also, you do not need to meet any work test conditions and are able to make the downsizer contribution even if your total super balance exceeds $1.6 million. There is no upper-age limit on making the downsizer contribution.
Related article: Superannuation Tips
Superannuation Work Test Over 67
If you would like to make a personal concessional contribution, salary sacrifice contribution or non-concessional contribution and you are aged between 67 and 74, you will need to satisfy the superannuation work test or work test exemption.
To satisfy the superannuation work test, you need to work 40-hours over a 30-consecutive day period in the financial year that the contribution is made and prior to the contribution being made.
The work test exemption allows you to make personal non-concessional and concessional contributions (including salary sacrifice) for 12 months after the financial year that you last met the work test, provided your super balance was below $300,000 on the most recent 30 June. So, basically, you don’t need to have met the work test in the current year that you are making the contribution. This work test exemption can only be utilised in one financial year.
Benefits of Contributing to Super Over 65
It’s one thing to know whether or not you can contribute to super over the age of 65, but it’s another question as to whether you should.
Making voluntary contributions to super over age 65 is usually a no-brainer. The reason I say this is because the attractiveness of investing within super is the tax concessions it offers – concessional tax on investment earnings and tax deductibility of certain contributions. For most people, the trade-off of these tax concessions is that they can’t access the amount they contribute until they meet a superannuation condition of release. But, because attaining age 65 is a condition of release, you can contribute to super knowing full-well you can access the contributed amount any time you like, tax-free. You get to have your pav and eat it too.
In saying this, you need to be mindful that all investment earnings received within the super accumulation phase are taxed at up to 15% and your personal tax rate could be lower than this, which might make investing outside of super more beneficial. However, if you decide to convert your accumulation account to a pension account, all investment earnings are received completely tax free, which is hard to beat!
Of course, it is always prudent to also ensure you have enough savings in your personal bank account that you can access immediately in case of an emergency or unforeseen expense.
Contributing to super over age 65 can be a great retirement planning strategy.