Super Contributions for ‘Retirees’
Although the unofficial retirement age is 65, many people in today’s workforce are opting to continue to work on a full or part-time basis.
The good news is that there is no strict requirement to cash in your benefits at 65. In fact, subject to some important limitations, you can continue to make further contributions after 65.
- This could be beneficial if you:
- wish to boost your super balance; or
- believe you may be underfunded in anticipation of the years ahead.
Rules for contributing into an SMSF
For those with a self managed super fund (SMSF) the ability to continue contributing into your fund after 65 is governed by the fund’s trust deed and the minimum acceptance standards prescribed by superannuation law.
Contributions are usually made in cash. They can also be in the form of in-specie asset transfers or by the contributor indirectly paying the SMSF’s liabilities on the fund’s behalf.
After turning 65, all contributions into an SMSF can only be made if the member satisfies the ‘work test.’
What is the Work Test?
The work test allows for acceptance of contributions provided the member was gainfully employed for at least 40 hours over a consecutive 30 day period at any time during the financial year.
The member does not have to be gainfully employed at the time of the contribution as long as the test is satisfied at some stage during the year.
The crucial part of the work test is determining whether the member is ‘gainfully employed’.
‘Gainfully employed’ means employed or selfemployed for gain or reward in any business, trade, profession, vocation, calling or employment.
This indicates the receipt of some sort of remuneration in return for personal exertion (this does not include voluntary unpaid charity work).
We recommend exercising caution if your employment is related to personal or domestic work undertaken for family and friends. For instance babysitting and gardening. This kind of work still needs to be a business-like activity carried on for the purpose of financial gain. Retention of appropriate records is vital.
What changes at 70?
After reaching 70, the SMSF member can no longer receive spouse or government co-contributions on its behalf.
What changes at 75?
Contributions to the super fund must cease 28 days after the end of the month in which the member turns 75 (with the exception of super guarantee and award-related contributions).
How we can help
Super rules are complicated and they are always changing. Therefore good advice is essential.