In order to contribute to an SMSF, a Member over a certain age might have to meet the work test. An age restriction does not apply to your SMSF accepting mandated employer contributions.
For a contribution to be made to your SMSF when you are between the ages of 67-74 (the age restriction was 65-74 for 2019-2020 Financial Year and earlier income years), a Member will need to meet the requirements for the work test, which requires the Member to be gainfully employed.
Being gainfully employed means working for at least 40 hours during a consecutive 30-day period. This test has to be met each financial year in order to make contributions (both concessional and non-concessional) into your SMSF. Unpaid work is not considered as being “gainfully employed”.
Simplified Work Test
From 1 July 2021, Members aged 67 to 74 with a total Superannuation balance below $300,000 will be able to make voluntary contributions it they met the Work Test in the previous year, as long as all of the conditions outlined below are satisfied:
The Simplified Work Test has been authorised in the 2021 Federal Budget. To access the 2021 Budget, please click on the button below:
Other considerations when utilising the Simplified Work Test:
Example:
Nichole (68 years old) retires from full-time work on 1 June 2020. Her total superannuation balance is $150,000 at the end of the 2019-20 financial year. Nichole had not reached her concessional contribution cap over the past 2 years, having contributed only $18,000 in 2018-19 and $12,000 in 2019-20.
Does Nichole meet the Work Test in the 2020-21 financial year? | No |
Does Nichole meet the Work Test Exemption in the 2020-21 financial year? | Yes |
Is Nichole eligible to make contributions under Work Test Exemption in the 20-21 FY? | Yes |
Under the existing carry forward arrangements and new Work Test Exemption, how much concessional contribution can Nichole make? | Up to $45,000 ($25,000*3-$18,000-$12000) |
How much non-concessional contribution can Nichole make as a result of Work Test Exemption? | Up to $100,000 |
This simplified version of Work Test rules is effective from 1 July 2019. Members of an SMSF can use the templates provided below to assist with informing any relevant party that they have met the work test requirements.
For further guidance on the work test provisions, please see here for ATO guidance.
Superannuation Warehouse is based in Melbourne and have clients throughout Australia. We deliver our SMSF administration services in an efficient and paperless way. This efficient service means a competitive fee to you. Our low ongoing fees will enable you to take control of your Super.
Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.
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