Unique opportunities for your superannuation

9 September 2022

Work test removal and contribution flexibility

Are you looking to increase your superannuation balance and have cash or shares personally?

Are you aged between 67 and 75 and no longer working?

Or are you over 60 and planning on selling your home?

Removal of the work test requirement for personal non-concessional contributions

The work test changes have created a unique opportunity for individuals aged 67 to 74 who are interested in making additional contributions to super, but were previously ineligible to contribute.

From 1 July 2022, the work test has been removed for non-concessional contributions, meaning eligible individuals can make these until they turn 75. Non concessional contributions are those where you do not claim a tax deduction.

If you are over 67, you were previously restricted in the type and value of superannuation contributions that you could make – mainly due to the requirement to meet the “work test” – that is you would have had to meet a requirement of 40 hours of gainful employment within a 30 consecutive day period before you were eligible to make most types of superannuation contributions. 

Now, as long as your total superannuation balance was below the $1.7 million threshold on the 30 June prior to the contribution, you may be eligible to make new contributions to your superannuation balance, for example, by transferring shares or cash into a super fund.

Eligibility for bring forward non-concessional contributions also extended

The age restriction on using the bring forward provisions to make up to three years of contributions in one year has also been lifted.

This means a contribution of up to $330,000 (based on the current limits) could be made up to age 75.  The timing and value of the total potential contribution will depend on your individual circumstances but may present an opportunity to add to your superannuation balance.

Recontribution Strategy

From an estate planning perspective, adult children pay tax on the taxable component of their parent’s super benefits at a maximum rate of 15% (plus Medicare), if received directly from the super fund. 

By converting taxable super components to non-taxable via a “recontribution strategy”, adult beneficiaries can potentially eliminate the tax on these amounts.

If you do not have additional funds to make a contribution to super, instead the new contribution rules can be used to reduce the taxable component within your superannuation fund.

It is important to note any recontribution strategy will use an individual’s existing contribution cap space, without directly increasing their super balance.  If you have, or plan, to make additional contributions in the short to medium term, care should be taken to determine the merits of a re-contribution strategy.

Eligibility for downsizer contributions extended to age 60

The downsizer contribution allows many older Australians to make additional contributions to their super when they sell their main residence as there is a separate contribution cap.

From 1 July 2022, if you are over 60 and sell your principal residence (which you and/or your partner has held for more than 10 years) then a contribution of $300,000 per member of a couple may be made to superannuation. 

Having more savings inside superannuation and gaining the longer-term benefits from investing in the tax effective environment of super, is a great incentive to utilise this change.

But there are strict rules around advising your super fund that these types of contributions are being used– and the timing of the contributions – so specialist advice is recommended.  

If any of the above situations apply to you contact your Boyce adviser.

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