Budget 2022- Work test

Do I still have to meet the Work Test? - Budget 2021-2022 Announcements

Following years of advocacy form superannuation professional bodies, the Government has announced in the 2021-2022 Budget that from 1 July 2022, individual aged between 67 and 74 will no longer need to meet the work test to make superannuation contributions. This is a very position change that removes the impediment to increasing superannuation balances later in an individual's working life.

What is the work test?

The work test requires an individual aged between 67 and 74 to:

• Be gainfully employed and work at least 40 hours
• In any consecutive 30-day period

Passing the work test allows these individuals to make voluntary concessional and non-concessional contributions.

What is the work test exemption?

The work test exemption applies from 1 July 2019. To meet the exemption requirements, an individual must meet all of the following criteria by having:

• Satisfied the work test in the income year preceding the year in which you have made a contribution
• A total super balance of less than $300,000 at the end of the previous income year
• Not relied on the work test exemption in a previous financial year

The work test exemption extended the period in which individuals over 67 could make a contribution following the end of work by just one financial year.

What are voluntary concessional contributions?

Voluntary concessional contributions can be broken into various types of contributions:

• Salary sacrificed contributions
• Contributions for which you have claimed an income tax deduction
• Spouse contributions

The key element of a concessional contribution is that the payer of the contribution is entitled to a deduction for income tax purposes. Voluntary concessional contributions are those in addition to compulsory contributions you employer makes.

Currently, the concessional contribution cap (which include compulsory employer contributions and voluntary concessional contributions) is $25,000 per year.

What are non-concessional contributions?

Non-concessional contributions are those contributions made to your super fund from your after-tax income and where no deduction is claimed.

Currently, the non-concessional contribution cap for individuals under age 65 is $100,000 (or $300,000 where the bring-forward rules apply). For individual 65 and over, the non-concessional contribution cap is $100,000 per year.

When will these changes come into effect?

The Government has indicated that it expects the work test will be abolished from 1 July 2022. This is subject to the amending legislation receiving Royal Asset - i.e. the amending legislation being enacted.

This means individuals 67 and over will still need to meet the work test or the work test exemption prior to making any contributions until the law changed have been passed.

How can Tax Controversy Partners help you?

The abolition of the work test will mean that more Australians are able to contribute further funds into the concessionally taxed superannuation environment. Superannuation is your money set aside to support you in retirement – and we want to see more Australians living comfortably as self-funded retirees. With the addition of other contributions avenues such as the Downsizer scheme, there are many strategy options to be considered.

At Tax Controversy Partners, our experienced lawyers can advise you on your eligibility to make superannuation contributions and strategize contributions plans. Alternatively, if you believe you have made contributions over the specified caps, we can assist in rectifying rule breaches. Please contact us using our online contact form, via email at admin@taxcontroverypartners.com.au or by phone at 02 8513 3813.