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2 July, 2021
Understanding the superannuation work test
First Financial Team
You may have heard a bit about the superannuation work test recently. In the May 2021 Federal Budget, the Government announced their intention to remove the rule as it has been difficult to police and from 1 July 2022, the work test gained a new meaning.
Since 1 July 2022, you no longer need to meet the work test to make non-concessional or salary sacrifice contributions up until age 75 (plus 28 days after your birthday month).
The work test is now only required if you want to claim a tax deduction on your voluntary personal contributions between age 67 and 74.
Today we take a closer look at the existing rules and explain more about the work test exemption.
What is the work test?
The work test outlines the requirements you must meet if you’re aged 67 to 74 and want to claim a tax deduction for voluntary personal contributions to your superannuation.
The ATO states:
“To meet the work test, you must be gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made. This is an annual test – once you meet this test you can make contributions for the entire financial year.
Gainfully employed means employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
If you do unpaid work or only receive passive income, such as interest, dividends, trust distributions or rent, you do not meet the definition of gainfully employed.”
If you do unpaid work or only receive passive income, such as interest, dividends, trust distributions or rent, you do not meet the definition of gainfully employed.”
Work test exemption
The Government introduced the work test exemption on 1 July 2019.
Again, the ATO states: “For those subject to the work test, if you no longer meet the work test your super fund can still accept voluntary contributions for an extra 12 months from the end of the financial year in which you last met the work test, provided you meet certain criteria. This is called the work test exemption.
If you are in a defined benefit fund you cannot use the work test exemption. However, you can choose to open an accumulation account with another super fund to make voluntary contributions using the work test exemption.
To meet the work test exemption criteria, you must meet three conditions:
- You satisfied the work test in the financial year before the year in which you made the contribution
- Your total super balance is less than $300,000 at the end of the previous financial year
- You did not use the work test exemption in a previous financial year”
Utilising the work test exemption could be a useful strategy to help maximise your super in the early stages of your retirement, but it is important to note that this exemption is only available once.
We recommend discussing your personal situation with a professional financial adviser, to make sure you are accessing all available financial opportunities.
Speak to your adviser
We understand that the superannuation work test rules can seem complicated and while the work test is no longer the barrier it once was, there are still opportunities available where it applies.
Here at First Financial, our team of talented financial advisers can partner with you… helping you to make smart decisions with your money so you can build wealth, reach your financial goals and retire your way. Contact us today.
Read more Superannuation articles.
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