Working and contributing to super past 65

One of the ways that more Australians are boosting their retirement savings is by working beyond popular retirement ages – often on a part-time basis.

This leads to a fundamental question: In what circumstances can super fund members aged 65-plus and working on a part-time basis keep contributing to super?

The fact that 13 per cent of Australians aged 65 and over are still in the paid workforce or looking for paid work almost certainly won’t grab any headlines.

However, it is worth emphasising that this percentage is 2.6 times greater than 30 years ago, as recorded in the latest quarterly Australian labour force report from the ABS.

Given this long-term trend, it is clear that older super fund members will increasingly ask whether they can continue make super contributions. And no doubt many of these fund members will put this question to an adviser who understands their circumstances and the intricacies of superannuation law.

Currently, super funds can only accept non-mandated super contributions – such as personal non-concessional (after-tax) contributions and salary-sacrificed contributions – for members age 65-74 years of age who satisfy a work test.

To meet the work test, members must work at least 40 hours over not more than 30 consecutive days during the financial year in which a contribution is being made. This does not include unpaid work.

However, the Government proposes in the latest federal Budget to fully remove the contributions work test from July 2017 for members aged 65 to 74.

In short, this means that if the Budget proposals become law, contributions could be made for or by any member aged under 75.

Once members reach 75, super funds are no longer allowed to receive super contributions made on their behalf – apart from so-called mandated employer contributions. (These are superannuation guarantee contributions and contributions under an industry award/agreement.) No age limit applies with mandated contributions.

Many trustees of self-managed super funds have good reason to take a particular note of the rules on contributions for older members. This is partly because of the age demographics of the SMSF sector, which holds more than half of all superannuation assets invested in retirement products (including transition-to-retirement pensions).

The tax office publishes a useful guide for SMSF trustees: Contributions you can accept.

By Robin Bowerman
Smart Investing 
Principal & Head of Retail, Vanguard Investments Australia
04 May 2016 | Retirement and superannuation