What is the Work Test?
Let’s start with some background. The Work Test, or Age Work Test, or Over 65 Work Test, as it is often called, is a rule in place for personal contributions paid into a superannuation account by a member who is over a specified age.
Members under the specified age can make personal contributions into super without having to meet specific criteria (aside from adhering to the Contribution Caps). Members over the specified age needed to meet the following test to make personal contributions (please note: Employer contributions can always be made and there are no age limitations on those):
The member needs to be gainfully employed for at least 40 hours in a 30 day consecutive period, during the financial year in which they are contributing.
What has changed?
Two changes to the Work Test have recently been announced. The first is now in place and the second is expected to become law:
- From 1 July 2020 – You only need to meet the Work Test if you are aged 67 and over. In the past, this applied to everyone aged 65 and over.
- From 1 July 2022 – The Work Test will no longer be required for Non-Concessional and Salary Sacrifice contributions. It will only apply when you wish to make Personal Concessional contributions for which you would be claiming a tax deduction in your personal tax return.
It is important to note that, as at the date this blog was published, the “Bring Forward Rule”, which is explained in further detail in our Contributions Article , has not been updated to age 67. So, members aged between 65 and 67 can not use the Bring Forward Rule and are limited to the yearly Non-Concessional Contribution Cap.
What does “gainfully employed for at least 40 hours in a 30 day consecutive period” mean exactly?
- Gainfully Employed: This means you must have been employed, or self-employed, and been earning money from that employment. Volunteer work does not count.
- 30 consecutive days: This can be any consecutive 30 day period. It doesn’t have to be in the same month (e.g. You may have worked 40 hours from 15 August 2019 to 14 September 2019 and this would meet the work test requirement)
- At least 40 hours: This is the part of the rule that is often the trickiest.
To explain why this is tricky, I’m going to tell you a story about Sam. Sam has had a regular direct debit set up to make personal contributions into his super account each month and has had this in place for 10 years. Every month, $200 goes out of his account and into super.
On the 5th of May 2021, Sam celebrates his 67th birthday and, on 2 July 2021, his $200 is debited from his account to go into his super fund.
As the 2022 financial year began on 1 July 2021, it is highly unlikely that Sam has already worked 40 hours during the financial year in which his $200 contribution is to be applied, so his contribution would not be able to be accepted by his super fund.
If Sam works 8 hours per day, 5 days a week, the earliest he would be able to make a personal contribution for every financial year after turning 67, would be a week after the beginning of the financial year.
Work Test Exemption Reminder
From 1 July 2019, the government introduced a once-off exemption to the work test, which people can use once if they don’t meet the work test requirements in the current financial year, as long as they meet the following criteria:
- Their Total Superannuation Balance (the total of all superannuation accounts held in their name) is less than $300,000 as at 30 June of the previous financial year.
- They met the work test criteria in the previous financial year
- They have not used this work test exemption previously. It can only be used once in an individual’s lifetime, up to the age of 74.
If someone meets the above criteria, they are permitted to make contributions into superannuation up to the limit for both Concessional and Non-Concessional contributions, including any unused Concessional contribution cap amounts left over from the 2019 financial year onwards.
For more information on contributing to super over the age of 67 or if you have any other queries, please get in touch via email or call us on 1800 24 23 22.
GENERAL ADVICE DISCLAIMER – Any advice (perceived or otherwise) in this communication is of a general nature only. It does not take into account your objectives, financial situation or needs. Please seek personal advice before making a decision about a financial product or acting on any information in this communication.