Federal Budget 2019: Work test super changes

30 September 2019

Each year, the Federal Budget includes changes that affect superannuation. While this year these changes are modest, there’s one in particular that’s worth special mention.

The 2019 Budget proposes that people aged 65 and 66 should be allowed to make voluntary concessional (before tax) and non-concessional (after tax) super contributions without meeting the work test.

While this idea needs to be legislated before it can be put into action, let’s briefly unpack what the new rule around the work test would mean.

Firstly, what is the work test?

Historically, those aged between 65 and 74 need to prove that they’re still working in order to continue making contributions into super.

To pass this test, you need to be ‘gainfully employed’ for at least 40 hours during a period of 30 consecutive days in the financial year in which you want to make super contributions.

‘Gainfully employed’ means that you receive payment for your labour, and these 30 consecutive days can happen at any time during the year.

Generally speaking, being paid to assist family members with babysitting, gardening or other such tasks are unlikely to meet the criteria of the work test.

To prove you have passed the work test, and be allowed to contribute to super, you need to make a Work Test Declaration. This is evidence of the paid work you’ve done; for example, notes of work-related activities in the financial year and payslips. Until now, submitting this evidence has been a requirement for every financial year that you make personal super contributions after the age of 65.

What do the changes mean?

The 2019 Budget proposes that 65 and 66 year old Australians will no longer have to meet the criteria of the work test in order to make voluntary concessional or non-concessional contributions to their super. By delaying the work test requirements in this way, the government is bringing super into line with the eligibility for the Age Pension, forecast to reach 67 by 1 July 2023.

If you have any questions on these updates to the work test, including how they may impact you and the ways you can use them to bolster your super balance, request an appointment with an LGS financial planner today.

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The information on this website is of a general nature only and does not take into account your personal objectives, situation or needs. You should consider obtaining professional financial, taxation and or legal advice tailored to your personal circumstances prior to making any financial decision.