Recent regulation changes now allow superannuation funds to accept personal contributions, either concessional or non-concessional, up to 67 years of age.  This applies from 1 July 2020 and aligns with the age at which Australians can get access to the Government Age Pension.

Previously, a superannuation fund could not accept contributions from a member if that member were over 65 years of age, unless the member had met the “work test”.

The work test still applies for those aged 67 and over and requires a member to have been in paid work for at least 40 hours in a 30 consecutive day period before they are eligible to contribute money to superannuation.

Workers who are aged 75 years and over are still eligible for Superannuation Guarantee Contributions from their employer but cannot make additional personal contributions.

Contribution Caps

The annual contribution caps remain unchanged at $25,000 per member for Concessional Contributions and $100,000 per member for Non-Concessional Contributions for the 2020/21 financial year.

The “bring-forward rule” which allows a member to bring forward two future years of Non-Concessional Contributions to the current year, enabling a total contribution of $300,000, remains in place for those aged under 65 years of age.

Legislation to increase this age limit to 67 is currently before Parliament in the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020.  Once passed, this legislation would allow the use of the bring-forward rule from 1 July 2020.

Strategy Implications

For those nearing 64 years of age and considering making additional contributions to superannuation, you may wish to reconsider your strategy.

Consider the example below for two people, Ben, and Belinda, who both turned 64 on 30 June 2020.  They each have personal money to top up their superannuation balance, and their current balances in super at 30 June 2020 are $600,000.  Both are retired and have no intention of working again.

Ben decides to put $300,00 into his super fund this year to maximise his balance as soon as possible. As he is under 65 years of age, he can use the existing bring-forward rules and does not have to rely on the passage of legislation through Parliament.

Belinda decides to wait for legislation to pass and puts $100,000 into her super fund for the current and next financial years.  She hopes that legislation will pass to enable her to put a further $300,000 into her fund before she reaches 67 years of age.

The table below summarises their contributions to superannuation:

Ben used the bring-forward rule when he was 64 to make a $300,000 non-concessional contribution to his super fund.  Given this used his contribution limits from the next two financial years, he would only be able to put more money into super from 1 July 2023.  However, he would then be 67 years of age and ineligible to put more money into his super fund (unless he met the work test).

Belinda, on the other hand, was able to time her contributions and did not trigger the bring-forward rule until she was 66 years of age.  This enabled her to contribute $200,000 more than Ben to her super fund.  Note that Belinda does not need to meet the work test when she is 67 and 68 years of age, even though she is using those years for the bring-forward rule.  Of course, Belinda’s strategy relies on the passage of legislation through Parliament, which could be viewed as a risk.

Other than the new rules around age, there are many other issues to consider when thinking about making contributions to superannuation.  These include your Total Super Balance, your spouse’s age and super balance, and your overall net asset position.

Professional advice is important to ensure you make the most of your situation.  If you would like to speak to one of our highly qualified financial planners, please click HERE to make an appointment for a no-obligation meeting.