‘Trigger ages’ an important focus with new changes

Ms Mansell noted that between the 2021-22 and 2022-23 financial years, the way the work test operates with the acceptance of contributions would change.

In the current financial year, a fund is only able to accept a contribution for someone 67 or over if they meet the work test or work test exemption, she explained at the Tax Institute’s NSW Tax Forum. 

For the 2022-23 financial year, if the client wants to claim a deduction for a personal contribution, they will need to meet the work test at some point during the financial year they made the contribution.

Ms Mansell gave an example of a client who is turning 67 during the 2022-23 financial year and makes a contribution before their birthday.

“This client wants to claim a tax deduction for their contribution. We don’t need to worry about the work test because in this particular case, they made the contribution before their 67th birthday, so timing is critical,” she explained.

“If we flipped it and they made the contribution after their birthday, for instance, and this client wanted to claim a tax deduction for the personal contribution, then they need to meet the work test. They could meet the work test at the start of that financial year or at the end of that year as long as it’s met by 30 June.”

If they weren’t able to meet the work test, Ms Mansell noted that the contribution would still remain in the fund, but the client won’t be able to claim a deduction for it.

Ms Mansell said that this is why it’s important for SMSF professionals to focus on those years where “people turn over one of the trigger ages”, such as age 67.

“Sixty-seven is an important age moving forward. Often that’s where things go wrong, so focus on those tricky years,” she said.

“If you’ve got a client turning 67 next year and you want them to make a contribution and claim a tax deduction for it, then you might want to have a conversation around whether they think they’re going to meet the work test next year. If they don’t think they will, then get them to make that contribution before their 67th birthday so that they don’t need to meet the work test.

She also noted that while the contributions caps will stay the same for the 2022-23 year, the superannuation guarantee rate will increase again next year up to 10.5 per cent from 1 July 2022.

“Don’t forget to budget that in if you’re talking to clients about salary sacrificing or deductible personal contributions because those [little extra] amounts need to be taken into account,” she said.