Work test measure to add flexibility
The government has announced plans to provide Australians aged 65 to 74 with a total superannuation balance below $300,000 with a one-year exemption from the work test.
The government has introduced a measure that will allow Australians aged 65 to 74 with a total superannuation balance below $300,000 to be able to make voluntary contributions for 12 months from the end of the financial year in which they last met the work test. The measure, if enacted, is set to commence from 1 July 2019.
Total superannuation balances will be assessed for eligibility at the beginning of the financial year following the year that they last met the work test, the government explained in the budget papers.
“Once eligible, there is no requirement for individuals to remain under the $300,000 balance cap for the duration of the 12-month period.”
Treasury also confirmed that individuals will be able to utilise unused concessional cap space to contribute more than $25,000 under existing concessional cap carry forward rules during the 12 months.
Fitzpatricks Private Wealth head of strategic advice Colin Lewis said while this measure will only apply to those with a total super balance of $300,000 or less, it will give those members an opportunity to do an extra year's contributions after the year in which they meet the work test, which will help to “bolster their super.
“They provide an example where an individual nearly doubles what they had in super from the ability to use the catch-up contributions together with a non-concessional contribution for that year, so it’s not a bad measure,” said Mr Lewis.
NowInfinity technical director Julie Dolan said the measure could provide individuals in this category additional flexibility to get their affairs in order.
While $300,000 may appear to be a low balance for someone in the 65 to 74 age bracket, said Ms Dolan, the median superannuation balance, she pointed out, “is unlikely to be much higher than this”.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.