What is the Work Test and what has changed?
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.
This age, for as long as the Work Test rule has existed, was 65. However, this has now been increased to 67.
Members who are under 67 years of age may make personal contributions into superannuation without having to meet specific criteria (aside from adhering to the Contribution Caps), but for those aged 67 and above, they need 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 Work Test rule states that if you are aged 67 or older, you may only make personal contributions into super if you were gainfully employed at least 40 hours in a 30 day consecutive period, during the financial year in which you are contributing.
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.
This sounds very simple when you first read it, but let’s break down a few of the finer points:
- 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 65 or if you have any other queries, please get in touch via email or call us on 1800 24 23 22.