An SMSF specialist has reminded trustees aged between 67 and 75 they may be eligible for an exemption to the work test under certain conditions if looking to claim a tax deduction for a personal contribution to their super fund.
“The exemption allows eligible individuals to make personal concessional contributions for one additional year,” SMSF Alliance practice principal and SMSF specialist mentor David Busoli confirmed.
To qualify for the exemption, individuals must have met the work test in the financial year immediately prior to the year in which the contribution is made, their total super balance at the previous 30 June needed to be under $300,000 and they cannot have used the facility previously.
Busoli suggested the exemption was particularly useful for individuals transitioning out of the workforce who want to make one last deductible contribution, even if they do not work in that year.
While the work test may no longer need to be met for members to contribute to superannuation between the ages of 67 and 75, it is still required if a personal tax deduction is to be taken, unless members meet the criteria above for an exemption.
The work test requires people to be ‘gainfully employed’ for at least 40 hours within 30 consecutive days in a financial year. It can be satisfied at any time during the financial year, even after the contribution is made, provided it is within the same financial year as the contribution.
Busoli pointed out the definition of gainfully employed is quite broad and means being employed or self-employed for gain or reward in any business, trade, profession, occupation or employment.
“While not generally a common law employee (particularly in the case of a non-executive director who does not engage in the day-to-day management of the organisation), a director of a company is specifically included as an employee for SIS (Superannuation Industry (Supervision)) purposes provided the director is entitled to payment for their duties as a director,” he explained.
He pointed out this is irrespective of whether the company is carrying on a business or not, however, a self-employed person would need to be carrying on a business.
“Gain or reward, while not defined in SIS, would include remuneration such as salary or wages, directors’ fees, business income, bonuses, commissions, fees or gratuities which have been obtained in return for personal exertion,” he noted.
As such, unpaid work does not meet the definition of gainfully employed, he said.
