Proposed contributions flexibility is good news for older Australians

On 13 May 2020, the Government introduced legislation to increase the age at which contributions can be made to superannuation:

  • without meeting the work test
  • utilising the bring-forward rule, and
  • on behalf of a spouse.

These measures were originally announced in the 2019/20 Federal Budget with a proposed start date of 1 July 2020 and are contained in:

  1. Treasury Laws Amendment (More Flexible Superannuation) Bill 2020,
  2. Superannuation Legislation Amendment (2020 Measures No.1) Regulations 2020 (not available yet).
Work test and bring-forward rule

The work test will no longer need to be met to make voluntary contributions to superannuation from 1 July 2020 for those aged 65 and 66. This means the work test requirements will align with Age Pension age, which will reach age 67 from 1 July 2023.

The ability to utilise the bring-forward rule will also be amended to allow individuals less than age 67 (on 1 July of a financial year) to contribute a greater amount to superannuation.

There is no change to other criteria, such as the total superannuation balance, which limits the ability to make non-concessional contributions.

The removal of the work test would provide the opportunity for eligible clients to:

  • make non-concessional contributions
  • make concessional contributions including catch-up contributions
  • implement the recontribution strategy
  • manage tax, including capital gains tax
  • claim the spouse contribution tax offset or co-contributions (if eligible)
  • make contributions under the small business CGT concessions, and
  • transfer foreign superannuation into an Australian superannuation account.
Spouse contributions

The age limit for spouse contributions will increase to 74. Currently, spouse contributions can only be made if the receiving spouse is under age 70 and meets the work test if aged 65 to 69. Additional flexibility will be provided by the removal of the work test for those aged 65 and 66.

This would enable spouse contributions to be made for the receiving spouse without the need to satisfy the work test up to age 67. From age 67 to 74, the work test would need to be satisfied by the receiving spouse.

Making spouse contributions is a simple strategy that enables a spouse’s superannuation to be boosted. This may be used as a means of equalising the superannuation interests of both members of the couple. It may also entitle the contributing spouse to access to the spouse contribution tax offset.

Other criteria for spouse contributions also remains unchanged, such as the total superannuation balance.

Next steps

To find out more about how any of these measures may be of assistance in your individual circumstances, please contact Gordon Thoms or David Conte at Calibre Private Wealth Advisers on ph. (03) 9824 2777 or email us here.

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

Liked this article? Share it!