How will the proposed Federal Government changes affect you?
From 1 July 2019, the Government has proposed to provide a one-year exemption from the work test for voluntary superannuation contributions, to allow new retirees to boost their superannuation balances.
Currently, if you’re aged between 65-74 you must work a minimum of 40 hours in any 30-day period in the financial year to keep making contributions to superannuation – this is known as the work test.
Under this proposal, if your super balance is less than $300,000, you will be able to make voluntary contributions for 12 months from the end of the financial year in which you last met the work test.
What can you do now?
From 1 July 2018, if you haven’t contributed up to the concessional contribution cap limit of $25,000, you can carry forward up to five years’ worth of the concessional cap. This is known as the ‘carry forward rule’. The first year in which you can apply these unused concessional contributions is 2019-20.
Other information you should know
Existing annual non-concessional ($100,000) and concessional ($25,000) caps will continue to apply to contributions made under the work test exemption.
Non-concessional contributions include your after-tax contributions such as non-deductible personal contributions and spouse contributions. These are called after-tax contributions because you’ve already paid income tax on the money before contributing it to your super.
Note, however, individuals will not be able to access bring forward non-concessional contributions under the work test exemption.
Concessional contributions or before-tax contributions include employer contributions and salary sacrifice contributions, as well as personal deductible contributions made by employees. Read how to top up your super with unused concessional contribution caps in the case study below.
Case Study: Carry-forward of unused concessional contributions
Laura – making the most of contributions
In 2018-19, Laura makes concessional contributions of $10,000. This leaves an unused amount of the concessional contribution cap of $15,000, which Laura can carry forward for up to five years to increase her concessional contribution cap.
In 2019-20, in addition to her normal $25,000 concessional cap, Laura can use the $15,000 of unused cap from the previous year. Laura’s total concessional cap for 2019-20 is $40,000.
If Laura makes a personal contribution, she can claim this as a tax deductible contribution.
Having the opportunity to add a substantial lump sum to her super balance gives Laura more certainty to plan for the future and enjoy retirement.
Laura could also contribute up to $100,000 in non-concessional contributions.
Need more information?
“Keeping up to date with changes to your pension can feel confusing and overwhelming. It doesn’t need to be,” says Matt Davey, Senior Financial Planner at Club Plus Financial Planning. He goes on to say, “we work in partnership with members to develop goals and a financial plan to set them up for retirement. This includes the right level of non-concessional and concessional contributions to ensure that members receive a tax advantage, not a tax bill.”
If you would like to understand how the proposed work exemption test will impact on your retirement plans or how you can make voluntary contributions to your super, get in touch with experienced Financial Advisors, at Club Plus Financial Planning. For a no obligation appointment, email email@example.com, call our Member Hotline on 1800 680 627 or fill out the appointment request form.