The Work Test
Adding to super after 65
Can you still contribute to your super after you turn 65?
Once you turn 65, the laws around contributing to your super change. However, it’s possible to continue adding to your super and enjoying the tax benefits that can come along with doing so. You just need to make sure you meet the work test for super and stay within the caps on contributions and your super balance. The work test applies until you turn 75.
What is the work test for super?
In order to make voluntary, before-tax contributions to your super once you turn 65, you must be able to show that you have been gainfully employed for 40 hours or more in any 30-day period in a financial year. This is called the work test.
If you satisfy the work test, then you should be able to make voluntary contributions to your superannuation and claim the lower tax rate for before-tax contributions.
But what exactly does it all mean? Let’s break it down.
The ATO defines ‘gainful employment’ as being “employed or self-employed for gain and reward in any business, trade, profession, vocation, calling, occupation or employment”.
In simple terms, that means you’re working and getting paid for it.
You don’t need to receive the income directly to be classified as gainfully employed; you can choose to salary sacrifice part or all of it.
Gainful employment does not include voluntary work and rarely includes earning a passive income (an income you are not actively involved in on a day-to-day basis, such as income from a rental property) or ad hoc income of a domestic nature, such as being paid to house-sit for a friend.
At least 40 hours in a 30-day period
To meet the work test criteria, you must be able to prove that you were gainfully employed for 40 hours or more in a consecutive 30-day period within the financial year you’re claiming your tax concession. How you accrue the hours is up to you. For example, you could work 5 hours every Tuesday and Wednesday for four consecutive weeks, to meet the minimum hours – as long as those weeks are prior to 30 June.
As with regular voluntary contributions to your super prior to turning 65, contribution caps still apply to your payments. These are the maximum amounts you can voluntarily contribute in order to gain the tax concession. In 2019/20, they are:
- Before tax contributions cap: $25,000
- After tax contributions cap: $100,000
Being over 65 doesn’t disqualify you from the government super co-contribution or making a voluntary payment to your partner’s super through spouse contributions. If you want to take these actions, the first step is to pass the work test.
How it works
At the end of the financial year in which you've made voluntary contributions, you’ll need to ask your super fund for a work test declaration form. Once you’ve signed it and returned it to your super fund, and they’re satisfied you meet the criteria, they’ll send you a letter confirming that they’ve received your declaration. Once you have that letter, you can make a claim for a deduction via your tax return.
What is the work test exemption?
The work test exemption allows people aged 65 and 66, who are still getting their retirement finances in order, to make voluntary, before-tax contributions to super as they have been previously, without meeting the work test criteria. They can do this for one financial year, subject to certain conditions.
This exemption may be available, as long as:
- You apply for the exemption in your first year after retirement.
- You haven’t applied for the work test exemption before, and don’t intend to apply for it in future financial years.
- Your super balance at the end of the previous financial year was less than $300,000.
It also allows you to activate the bring-forward benefits, which may let you exceed the contribution caps in your final year of employment.
Still need more information?
Since it is your super fund that looks after the details of your contributions (and not the ATO), they’re the best people to talk to if you have any questions. Alternatively, have a chat with a financial advisor with specialist knowledge in retirement, pensions and superannuation.