A technical specialist has confirmed individuals, who intend to use the work test exemption, are required to satisfy the work test in the year prior to making a personal deductible contribution even though meeting that requirement was not needed at the time.
“An example of that might be last year [a person] was 66 and so therefore [they] could make deductible contributions without having to satisfy the work test, and this year [they have turned] 67 [so they] need to meet the work test,” Accurium senior SMSF educator Anthony Cullen put forward during an Accurium webinar held yesterday.
“[The individual has to then determine] if the work test were to apply last year, did [they] meet it or did [they] not. The fact that it [didn’t] apply does not change the fact that [they] still have to consider whether [they] would have met it if the test did apply.
“So just be mindful of that.”
Cullen also took the opportunity to explain the actions trustees must take should they make a personal deductible contribution, but fail to satisfy the work test in the relevant financial year.
“If you’ve got a situation where you’ve got a client who has made a contribution wanting to treat it as concessional on the assumption that they’re going to satisfy the work test, but by the end of the year they don’t … can you then argue that [they] didn’t meet the work test, so [they weren’t] able to make a concessional contribution, [they] need to have that amount withdrawn now?” he said.
“The answer to that is no. Just because [the contribution] can’t be treated as a concessional contribution does not change the fact that the fund was probably able to accept the contribution. It just means that it’s probably going to be treated as a non-concessional amount.”
The work test applies to individuals between the ages of 67 and 75 and stipulates they must be gainfully employed for at least 40 hours in any period of 30 consecutive days during the income year in which the contribution was made.
