The federal government will remove the work test for people aged 67 to 74 when making or receiving non-concessional contributions into superannuation as part of a budget measure to boost the retirement savings of those who have had limited exposure to the compulsory superannuation system.
The change was outlined in Budget Paper No 2, which stated 67 to 74 year olds will also be able to access the non-concessional bring-forward arrangement, subject to meeting the relevant eligibility criteria, but a number of caps will remain in place.
These include the cap on lifetime superannuation contributions, currently at $1.6 million but changing to $1.7 million from 1 July 2021, and the annual concessional and non-concessional caps. The work test will remain in place for concessional contributions.
A superannuation fact sheet distributed with the budget papers stated the reason for the change was that “retirees aged 70 today potentially had 20 years or more in the workforce before compulsory superannuation was introduced in 1992”.
“That is why the government will amend the work test rules to allow retirees who have not had the benefits of compulsory superannuation throughout their working lives to get more out of the superannuation system. This change also recognises that many retirees have accumulated savings outside of superannuation,” it said.
SuperConcepts SMSF technical and strategic solutions executive manager Philip La Greca said the change was a positive move for individuals who had large sums of money outside the superannuation environment.
“If a person only has a small sum of money, this may not make a big difference in their ability to move it into superannuation, but for those with larger sums, and in conjunction with the bring-forward arrangements, they could get up to $440,000 into superannuation in a single year,” La Greca told selfmanagedsuper.
BDO director and SMSF specialist Mark Wilkinson said the change created new planning opportunities and an expanded time frame for those eligible to take action.
“This extends that period that people can save for and the time in which they can consider how much they have, how much tax they will pay and whether they keep those funds inside or outside of superannuation,” Wilkinson told selfmanagedsuper.
The measure will take effect from the start of the first financial year after royal assent of the enabling legislation, which the government expects to have passed through parliament before 1 July 2022.