In what seems to be the ever-changing world of superannuation, the Commonwealth Government has amended the regulations that result in closer alignment to the age pension age, which is a good thing.

The eligibility for the government age pension was increased from 65 in line with the following table:

Soon enough, the eligibility for the age pension will be upon turning 67, however, this is out of whack with the superannuation rules, which principally revolve around turning 65.

Under the current superannuation rules, once you turn 65 the only way you can make a voluntary contribution into super is if you satisfy the work test. This involves working at least 40 hours in a consecutive 30-day period in the financial year the contribution is made.

The current system disadvantages those retirees who have turned 65 as they are not yet eligible to apply for the age pension, however, unless they work, they are restricted from being able to make a voluntary contribution into super.  If an asset was realised or they acquire the winning lottery ticket a voluntary contribution into super is not an option.

It’s highly undesirable to expect a retiree to have to go back to work in order to be able to make a contribution into super hence, quite rightly, this mismatch in the system has been removed.

From the 2020/21 financial year people aged 65 and 66 will be permitted to make a voluntary contribution into super without having to satisfy the work test.  This will permit a ‘non-concessional’ contribution to be made up to the $100K maximum limit.

Similarly, the age at which the ‘bring-forward’ rule for non-concessional contributions is before parliament to be increased from 65 to 67.  The bring-forward rule permits two future years of non-concessional contributions to be brought-forward resulting in a maximum of $300K that can be voluntarily contributed into super instead of $100K.

These are positive steps to alleviate gaps in the retirement system that make it fairer for everyone.

Please note this article provides general advice only and has not taken your personal, business or financial circumstances into consideration. If you would like more tailored advice, please contact us today.