Working beyond 65, either part time or as a casual, can be financially beneficial when it comes to boosting your super. But to make any contributions – concessional or non-concessional – you need to first satisfy certain rules.
“If you want to contribute to super from the age of 65 to 74, you have to meet the work test. If you can’t meet the work test you cannot put money into super,” says Claire Mackay, an independent financial planner and owner of Quantum Financial, a multi-award-winning advisory firm.
“You have to be in paid employment and you must work for at least 40 hours over a consecutive 30-day period in the financial year in which you want to make the contribution. You can meet the work test at any time during that year but you cannot put money into super until you’ve met the work test,” she says.
In terms of superannuation law, work is defined as “gainful employment”. That means you need to be employed, or self-employed, for financial gain in any profession, business, trade or occupation for which you receive a wage.
Working as a volunteer doesn’t cut it, says Mackay, as there is no financial gain. Similarly, earnings from investments such as rent, interest or dividends don’t qualify either, as it doesn’t involve paid work.
The work test has to be met only once in each financial year. Once you’ve satisfied it, you don’t need to be gainfully employed for the rest of the financial year or meet the work test again each time you make a contribution.
For seniors who qualify, understanding the rules gives them options they would otherwise not have to top up their super from wages, the sale of a property or an inheritance.
Concessional (before-tax) and non-concessional (after-tax) contribution caps are being cut from July 1: the former down to $25,000 from $35,000 and the latter down to $100,000 from $180,000. This is where planning ahead has been helpful.
Once you are 65 or over, you can no longer take advantage of the bring-forward rule, which allows you to bring forward two years’ worth of non-concessional contributions. For the 2016-17 year someone under 65 could make an after-tax contribution of $540,000. From July 1 it drops to $300,000.
“If you are 64, you have the ability to pull forward either $540,000, or $300,000 going forward, up until the day before your 65th birthday. For those aged 65-74, if you meet the work test you can do the $35,000 (or $25,000), and you can do the $180,000 (or $100,000). But you can’t use the pull-forward rule,” says Mackay.
Some of her elderly clients whose children are in their early 60s have taken advantage of the more generous non-concessional contribution caps and used the rule to bring forward their inheritance.
There’s greater recognition now of the benefits of staying active – a use-it or lose-it effect. In a recent report on the health of the nation, the UK government’s chief medical officer, Sally Davies, says people should delay retirement or do volunteer work to stay mentally and physically active.
Australian seniors commentator Michael O’Neil agrees: “People like being active and productive. They feel it’s physically and mentally better for them. There’s a greater awareness of that now.”
Mackay says some clients consult in their old industry or mentor younger colleagues. They might work part time or work three months and then take time off.
“You talk to people in their 60s and they see themselves as young and active. They have a wealth of experience and to say at some arbitrary age someone is no longer productive is both an insult to the individual but also short-sighted from a community perspective,” she says.
“We say to clients if you have the desire and ability to work, that’s great because that gives us financial options. But it does need to be genuine work.”