After-tax contributions to superannuation can now be made up to age 67 and the legislation was partially implemented on 1 July 2020.
The change in legislation pertains to after-tax contributions to superannuation – these are amounts that can be contributed to superannuation tax-free from accumulated savings, sale of assets etc. It doesn’t include employer contributions, salary sacrifice or tax deductible contributions, all of which are taxed when they reach your superannuation fund.
Prior to 30 June 2020 the rules that pertained to after-tax contributions were:
Those aged 64 and under could make after-tax contributions of up to $100,000 pa or up to $300,000 over 3 consecutive financial years. The latter refers to a ‘pull forward’ rule allowing the contributor to make a contribution of more than $100,000 in a financial year but then limiting the contributions that they can make over the next 2 financial years to an aggregate amount of no more than $300,000 over 3 consecutive years. For example, if the contributor used the pull forward rule to contribute $250,000 to superannuation in one financial year then they’d be limited to a maximum of $50,000 in additional after-tax contributions over the next 2 financial years.
Those aged 65-74 could make post-tax contributions of up to $100,000 pa but only if they met the work test. The work test requires the contributor to have been gainfully employed for a minimum of 40 hours in any consecutive 30 day period in the year in which the contribution is made. Those in this age bracket were limited to after-tax contributions of $100,000 pa (ie: they can’t use the pull forward rule).
What changes apply from 1 July 2020?
Hence, from 1 July 2020 the rules pertaining to after-tax contributions are:
Age Group Maximum annual contribution
Potential pull-forward contributions
Those aged 66 and under $100,000
Maximum $300,000 over 3 consecutive years*
Those aged 67-74 $100,000 if meeting the work testNot available
Those aged 75 and olderNilNot available
* Assuming that the legislation to permit those aged 65 and 66 to utilise the pull forward rule passes parliament.
What impact does this have on your financial plan?
The change in regulations provides further flexibility over coming years to ensure individuals have the maximum possible funds within a tax-free environment at retirement. The main advantage will be the extension to the period of time that everyone will be able to get funds into superannuation even if they are not working past age 65.
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