The government has released draft legislation that provides more scope for contributions to superannuation once someone has turned 65.
Generally, the trustee of a superannuation fund can only accept a contribution for someone who has turned 65 (and is under 75) if they satisfy the work test in the year of the contribution (worked at least 40 hours in a consecutive 30-day period).
It is proposed that from 1 July 2019, a superannuation fund can also accept a contribution by someone who has turned 65 (but is under 75) if the person:
- does not satisfy the work test in that year;
- satisfied the work test in the previous year;
- has a total superannuation balance under $300,000 at the preceding 30 June; and
- has not made a contribution under these rules before.
The proposed rules only allow a contribution cap of one year (currently $100,000), and do not allow access to the three year bring forward rule for contributions.
Before the trustee of an SMSF accepts a contribution under the new rules, they must check the trust deed. The way some SMSF trust deeds are drafted, their trust deeds will not allow acceptance of these contributions and must be amended before the contribution is made.
Useful but limited
The proposed rules provide a further opportunity for some people who have retired with low superannuation balances to contribute more to superannuation.
However, the proposed rules are quite restricted – the amount of the contribution is limited, it can only be used once and for the first year after the work test is last satisfied.
If you would like more information about these proposals, please contact a member of our superannuation team.